Did you recently fund your children to buy a house? In the U.S., the recipient (donee) of the gift is not required to file the tax return, but the giver (donor) is. Many people miss filing gift tax returns due to a lack of knowledge regarding the gift tax and how it impacts your income tax and estate tax situations.
A gift tax return or IRS Form 709 must be prepared if you give monetary gifts exceeding a certain threshold. Gifting can be an excellent strategy to reduce your overall estate and pass your wealth to the next generations if you plan and execute properly. To avoid the untaxed transfer of wealth, you need to file gift tax under certain conditions.
When to fill gift tax return
You must fill the Form 709 for the gifts more than $15,000 given to any other person other than your spouse for the 2020 tax year. However, if you made tax-deductible gifts to qualified charitable organizations in the past year, you are not required to file this tax. Moreover, if the gift amount does not exceed the yearly cap for a particular year, you don’t need to file Form 709.
You can file the gift tax without your regular tax documents. You have to report each recipient’s gift amount and not the total amount gifted in a year.
Educational and medical exclusion
Paying tuition fees on behalf of your children or any individual to a qualifying educational institution is not considered a gift. The definition of a qualifying institution is one that has a regular faculty, curriculum, and enrolled pupils. The payment must be made directly to the institution, excluding the stationery, book, and boarding supplies.
Any amount paid on behalf of an individual for medical care is not considered a gift either, provided the payment goes directly to the care provider and not the individual. However, if the donee’s insurance provider reimburses the amount, it’s not eligible for exclusion. More details about fulfilling the medical exclusion requirements can be found in IRS Code Section 213(d).
Difficult to assess the value of gifts?
Have you gifted any assets like a piece of fine art or a share of a family-owned business and was not sure of how much value they are? You would like to hire a qualified appraiser or business valuation specialist to ascertain the assets’ value. The Internal Revenue Service will require these appraisals to evaluate such investments before confirming the gift tax amount is appropriate.
Need more advice?
If you are confused about filing a gift tax return for assets and other property transfers, consult a tax advisor who can answer all your questions. At Hoshi CPA, LLC, we can evaluate and analyze your tax situation and refine and optimize the plans. We are the best IRS tax resolution company in Tigard, OR. We offer tax services, planning, compliance, monthly accounting, and virtual CFO professional services. Book a complimentary strategy session with our team on our website today. You can also get in touch by filling out our contact form.
