A client recently shared a heartwarming story: she gifted her son $25,000 this Christmas to help him buy his first car. It was her way of spreading holiday cheer, but this generous gesture came with a filling requirement of form 709.
๐ง๐ต๐ฒ ๐๐ฎ๐๐ถ๐ฐ๐
The IRS allows you to give up to $18,000 per recipient annually without filing a gift tax return. This is your tax-free zone for gifts to friends, family, or anyone else.
๐๐ถ๐ณ๐๐ถ๐ป๐ด ๐๐ถ๐ด? ๐๐ถ๐น๐ฒ ๐๐ผ๐ฟ๐บ ๐ณ๐ฌ๐ต
When your gift exceeds $18,000, you must report the excess.
Example: My clientโs $25,000 gift to her son.
$25,000 – $18,000 = $7,000 to report on Form 709.
๐ก๐ผ ๐ง๐ฎ๐
๐ฒ๐ ๐ฌ๐ฒ๐ (๐จ๐ป๐ถ๐ณ๐ถ๐ฒ๐ฑ ๐๐ฟ๐ฒ๐ฑ๐ถ๐ ๐ถ๐ป ๐๐ฐ๐๐ถ๐ผ๐ป)
Filing doesnโt mean you owe taxes. The excess reduces your lifetime gift & estate tax exemption of $12.92M (2024 limit). Taxes only apply when your lifetime gifts + estate exceed this amount.
๐ช๐ต๐ผ ๐ก๐ฒ๐ฒ๐ฑ๐ ๐๐ผ ๐๐ถ๐น๐ฒ?
If youโre gifting more than $18,000 this holiday season, you must file Form 709 by April 15, 2025. Gifts can include cash, property, or even paying bills. However, direct payments to schools or hospitals are excluded from the gift tax.
๐ช๐ต๐ผ ๐ฃ๐ฎ๐๐ ๐๐ต๐ฒ ๐ง๐ฎ๐
? ๐ง๐ต๐ฒ ๐๐ผ๐ป๐ผ๐ฟ!
Gift taxes are always the donorโs responsibility, not the recipientโs. But when donees agree to pay the taxes, complications can arise.
๐๐ถ๐ฒ๐ฑ๐ฟ๐ถ๐ฐ๐ต ๐. ๐๐ผ๐บ๐บ๐ถ๐๐๐ถ๐ผ๐ป๐ฒ๐ฟ
In Diedrich v. Commissioner, the U.S. Supreme Court ruled against taxpayers who transferred property to their children with the condition that the children pay the resulting gift taxes. The Court determined that this arrangement relieved the donors of a financial burden, creating taxable income for the donors.
Gift taxes are meant to be paid by the donor.
Diedrich v. Commissioner โ https://lnkd.in/dsA___74
This holiday season, spread the joyโbut keep your tax plan in check. Generous gifts donโt always mean extra taxes, but knowing the rules can help you avoid years of hassle.
Remember: Dream big, but file smart.
