written by Brenda Logsdon
Gift tax returns may need to be filed even if there will not be any gift tax liability. The gift tax law is complex, but the following rules will simplify the filing requirements.
When must the return be filed?
Generally, you must file a gift tax return, form 709, U.S. Gift Tax Return, if any of the following situations apply to the gifts you will make in 2013:
- Gifts you make to a person (other than to your spouse) that exceed $14,000.
- Gifts you make to your spouse in trust that does not meet the exception to the terminable interest rules, or that does qualify, and requires a qualified terminable interest property election.
- You and your spouse make the election to split gifts.
- Gifts you make of future interests even if the value of the gift is less than $14,000. This would include gifts in trust with no required income interests or gifts of remainder interests such as GRATs, Grantor Retained Annuity Trusts.
When is a gift tax return not required?
A gift tax return will not be required to be filed if the only gifts you make in 2013 are the following:
- Gifts you make to your spouse out right.
- Gifts you make to a political organization.
- Payments you make directly to an educational organization for tuition. To qualify for the exception, the payments must not go to the individual whose is benefiting from the tuition payment. These payments are not considered gifts and, therefore, do not use any of the $14,000 annual exclusion.
- Payments you make for qualified medical expenses made directly to the medical provider or medical insurance paid directly to the insurance company. As with tuition, these payments are not considered gifts.
- Payments you make to a person that do not exceed $14,000.
How much tax will be paid when the tax return reflects taxable gifts?
Even though the gift tax return may reflect taxable gifts, there will not be any gift tax due if the prior year taxable gifts plus the gifts you make for 2013 do not exceed $5,250,000 ($5,120,000 for 2012). This amount is commonly referred to as your life exclusion amount which increases annually with inflation. Any amount of the exclusion used on the gift tax returns will reduce the amount available to your estate at death.
If you have any questions about filing gift tax returns, please call us at 417-881-0145.