Frequently Asked Questions on Federal Gift Taxes

Below are some of the more common questions and answers about Gift Tax issues. You may also find additional information in Publication 559 or some of the other forms and publications offered on our Forms Page. Included in this area are the instructions to Forms 706 and 709. Within these instructions, you will find the tax rate schedules to the related returns. If the answers to your questions can not be found in these resources, we strongly recommend visiting with a tax practitioner.

• Who pays the gift tax?
• What is considered a gift?
• What can be excluded from gifts?
• May I deduct gifts on my income tax return?
• How many annual exclusions are available?
• What if my spouse and I want to give away property that we own together?
• What other information do I need to include with the return?
• What is "Fair Market Value?"
• Whom should I hire to represent me and prepare and file the return?
• Do I have to talk to the IRS during an examination?
• What if I disagree with the examination proposals?
• What if I sell property that has been given to me?
• Can a married same sex donor claim the gift tax marital deduction for a transfer to his or her spouse?

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Who pays the gift tax?The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

What is considered a gift?Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.

What can be excluded from gifts?The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.

1. Gifts that are not more than the annual exclusion for the calendar year.
2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
3. Gifts to your spouse.
4. Gifts to a political organization for its use.

In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.

May I deduct gifts on my income tax return?Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). If you are not sure whether the gift tax or the estate tax applies to your situation, refer to Publication 559, Survivors, Executors, and Administrators.

How many annual exclusions are available?The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $11,000 in 2002-2005, $12,000 in 2006-2008, $13,000 in 2009-2012 and $14,000 on or after January 1, 2013, the annual exclusion applies to each gift. The annual exclusion for 2014, 2015, and 2016 is $14,000.

What if my spouse and I want to give away property that we own together?You are each entitled to the annual exclusion amount on the gift. Together, you can give $22,000 to each donee (2002-2005) or $24,000 (2006-2008), $26,000 (2009-2012) and $28,000 on or after January 1, 2013 (including 2014, 2015, and 2016).

What other information do I need to include with the return?Refer to Form 709 (PDF), 709 Instructions and Publication 559. Among other items listed:

1. Copies of appraisals.
2. Copies of relevant documents regarding the transfer.
3. Documentation of any unusual items shown on the return (partially-gifted assets, other items relevant to the transfer(s)). source: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes