April 15 might be one of the dates people think of the most as they rush to file their taxes. One form that is often forgotten is the gift tax returns form, also known as Form 709, which covers taxable gifts that were bestowed the previous year.
What does this mean?
In your lifetime, you are allowed to gift up to $5.49 million. This means you are exempt from paying gift taxes. The IRS will know how much money you are gifting with an annual federal tax exemption, and in 2017 it totals $14,000; meaning you can give away up to $14,000 in gifts to as many people as you want, including family and friends. This annual exclusion limit generally changes each year, so make sure to check what the yearly amount is before filing your gift tax return form! If this amount is exceeded, you could owe gift tax and interests that will result in penalties in the long run.
It is important to know that the recipient of the gift doesn’t need to file the Form 709, but the person who presented the gift is responsible for filing the taxes.
Exemptions from Gift Tax Returns
You can get an exemption from gift tax return if the gift given falls under one of the following:
- Any gift made to your spouse (he or she must be a United States citizen)
- Gifts made to cover medical expenses. For this to be an exemption, the medical bills must be paid directly to the medical service providers.
- Gifts made to cover tuition expenses. For this to be an exemption, the tuition needs to be paid directly to the institution Any IRS approved charities
Taxes don’t have to be as difficult as you think if you understand each form’s purpose. Knowing what the gift tax return is and how the exemptions work will help you ease the tax filing process. If you need help with gift tax return forms, please contact us at (781) 436-5810 or hylencpa.com/contact-us!