Gift Tax

Gift tax is a type of transfer tax applied by the federal government and by some states. Payment of gift tax is the responsibility of the donor, who must file a Gift Tax Return (Form 709) in a year in which he or she gave a taxable gift.

Two of the most important limitations on the gift tax are the annual exclusion and lifetime exemption amounts. The annual exclusion allows gifts of up to $15,000 per recipient each year (as of 2020) free of any gift tax consequences. Gifts beyond that are also subject to a lifetime exemption amount, which is over $11.5 million as of 2020. Gifts beyond these exemptions are subject to gift tax, though charitable gifts and gifts to US citizen spouses are also exempt.

The gift tax dovetails with the estate tax, as the lifetime exemption for the gift tax is the same as for the estate tax and gifts that count against the gift tax lifetime exemption also count against the estate tax lifetime exemption.