Gift Tax Rate Confusion

Forum|Forum|11 months ago
April 11, 2025
2 replies
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Can someone help clarify whether Gift Taxes are due and on amounts above yearly limits?

My understanding is that there's a lifetime limit ($13M+) and a yearly cap per person. If you gift someone more than the yearly limit, you have to file form 709 but that does not make it taxable if your lifetime gifts are under that $13M cap.

However, I came across this blog post on TurboTax which has gift tax brackets and seems to indicate the tax rate applies once you exceed the yearly limit??

https://blog.turbotax.intuit.com/tax-planning-2/5-simple-tax-tips-for-end-of-the-year-giving-15938/

My scenario is that my parents are considering gifting their children $100k each. This puts them above the yearly limit so they'll have to file 709. But will they owe any taxes?

Best answer by MAK70

No, they will not owe gift tax now. The gifts subject to the gift tax are added to the lifetime estate when they die so any amount over the lifetime exclusion is taxed at that time. @InvisibleCrow

xmasbaby0

Employee

Gifts given to family members, friends or other individuals are not deductible. Gifts received are not taxable to the person who received the gift, and are not entered on a tax return.

If your gift exceeds the yearly limit ($18,000 per individual) imposed by the gift tax rules, then you will need to complete a Form 709 gift tax form and send it to the IRS, although it is very unlikely that you will owe any tax.

TurboTax does not support Form 709. It is not an income tax form and would not be included as part of an income tax return.

Here is a link to the form:

https://www.irs.gov/pub/irs-pdf/f709.pdf

https://turbotax.intuit.com/tax-tips/estates/the-gift-tax-made-simple/L5tGWVC8N

Here's a link for Form 709 preparation software:

https://www.puritas-springs.com/product-category/federal

Here are some useful videos on the Form:

https://www.youtube.com/watch?v=a5wJow5h-No

https://www.youtube.com/watch?v=5Z_28sVOrTY

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

InvisibleCrowAuthor

I'm still not clear on the brackets shown on the blog post I referenced. Under what circumstances do those rates apply?

MAK70

The rates apply to the amounts above the $18,000 annual exclusion.

The first $18,000 of gifts of present interest to each donee during the calendar year is subtracted from total gifts in figuring the amount of taxable gifts. This is the annual exclusion. Your parents can EACH gift $18,000 (this is called gift splitting), for which you are required to file a Form 709.

If possible, your parents should gift $36,000 each year, then no gift tax will be due.

Generally, you must file Form 709 no earlier than January 1, but not later than April 15, of the year after the gift was made.

InvisibleCrowAuthor

What about the lifetime exclusion/exemption? When does that rule apply. My scenario in question has person exceeding yearly limit which I understand means they have to file 709. BUT will they owe any taxes simply because they exceeded that 18k yearly limit and they're still below the $13M lifetime exclusion?

MAK70Answer

No, they will not owe gift tax now. The gifts subject to the gift tax are added to the lifetime estate when they die so any amount over the lifetime exclusion is taxed at that time. @InvisibleCrow