Form 709 and You – A Primer on Gift Taxation

A large pile of money with a ribbon on top.

A frequent question I get from clients is “isn’t there a limit on how much I can give?” The answer is that there is no limit on how much you can give, there is a limit on how much you can give without filing a gift tax return (Form 709).

Yes, in addition to the income tax we are all familiar with, there is such a thing as a gift tax. The limit on how much you can give away in any one year without filing a gift tax return is $15,000.00 for 2018, an increase from $14,000.00 in 2017. This amount is per person, so for example you can give away $15,000.00 each to as many separate people as you want. Likewise, your spouse can make a similar gift.

The second question is “will they have to pay income tax on the amount of the gift”. Good news, the gift is not taxable income to the recipient. When the gift is something other than money there may be capital gains tax consequences, so be sure to consult a tax professional when making a gift of appreciated property. There can be tax advantages to transferring property that has gone up in value at death, rather than making a gift during your lifetime.

Our third and final question is what if I do give more and must file a gift tax return? There is a lifetime limit on how much you can give away without paying a gift tax. When you file the gift tax return the IRS keeps a running total of your lifetime gifts so they know when you will start owing the tax.

The amount you can give away without having to file a gift tax return has nothing to do with the transfer penalty for Medicaid. Don’t confuse the gift tax laws with the Medicaid rules. If you might seek to apply for Medicaid within the next 5 years don’t make any gifts without consulting an elder law attorney first.

For questions about gifts, taxation of gifts, and how gifts fit into your estate plan, including Medicaid planning, get professional advice before acting.

Hammerle Finley Law Firm. Give us a call. We can help.

Want to receive our monthly email newsletter or book one of our attorneys for a speaking engagement? Email LegalTalkTexas@Hammerle.com and let us know how we can help.

The information contained in this article is general information only and does not constitute legal advice.