What is the Form 709: United States Gift (and Generation Transfer) Tax Return?
IRS Form 709 reports asset transfers that may be subject to federal gift tax and certain generation-shift transfer taxes. This form reports taxable gifts you make to others during your lifetime, including gifts of cash or tangible property, such as real estate. It is also used to grant lifetime tax exemptions when transferring property to a beneficiary (other than a spouse) who is at least 37 and a half years younger than the donor.
Form 709 must be completed with your income tax return for any year in which you make a taxable donation, but completing this form does not necessarily mean that you will owe tax on donations or generational leap transfers. . (Generation-skip transfer tax is an additional tax on a transfer of ownership that skips a generation, called a generation-skip transfer for short.)
Key points to remember
- Form 709 reports taxable donations and lifetime tax exemption allowances for generational leapfrogging.
- Certain types of financial donations may be excluded from donation tax.
- Generation Break Tax ensures that the appropriate amount of inheritance tax is paid when a generation break trust transfers assets between family members.
- Form 709 must be filed each year you make a taxable donation and attached to your regular income tax return.
Who can complete Form 709: United States Gift (and Generation Transfer) Tax Return?
When you make a financial donation to someone, you, and not the recipient of the donation, are responsible for paying the taxes owed on the donations. If you give gifts of cash, property, or other assets to someone in a given tax year, you must complete Form 709 to report the gift.
For IRS reporting purposes, a gift is:
“Any transfer to an individual, directly or indirectly, for which full consideration (measured in money or value) is not received in return. ”
The following are examples of scenarios that could be considered taxable gifts:
- A down payment donation to an adult child to help them buy a house
- Cash gifts made directly to a student to help pay for school
- Donations of real estate or other property that you give to someone
- Funds deposited into a 529 education savings account in the name of a beneficiary other than yourself or your spouse
- Forgive the loans you have made to someone else
There are, however, certain scenarios in which financial donations are not subject to gift tax. These include:
- Gifts falling within the annual exclusion limit
- Gifts to your spouse
- Tuition or medical expenses that you pay on behalf of someone else
- Gifts to a political organization for its use
The annual exclusion limit for 2021 is $ 15,000 (rising to $ 16,000 for 2022); this limit doubles to $ 30,000 for married couples filing a joint return (rising to $ 32,000 for 2022). The limit applies per beneficiary, so if you are married and have three children, you and your spouse can jointly donate up to $ 30,000 to each of them each year without exceeding the exclusion limit. This is called gift sharing, but it is only allowed when you and your spouse file a joint tax return.
Gifts for tuition or medical expenses should be paid directly to the biller to avoid incurring gift tax. If you want to help a grandchild with college expenses, for example, you will need to pay the tuition fees directly to the school. If, instead, you were to give your grandchild the money to pay for his tuition, that would fall under the rubric of taxable donations. The same goes if you pay medical bills. You will have to pay the health care provider directly to avoid the implications of gift tax.
Donations to qualifying charities are generally not subject to donation tax and may be tax deductible if you itemize using Schedule A.
How to Complete Form 709: U.S. Gift (and Generation Skip) Tax Return
You must file Form 709 for any tax year in which you make a taxable donation, unless you are covered by one of the exclusions mentioned above. If you are filing your tax returns electronically using online tax preparation software, you cannot complete this form online. Form 709 should be printed and mailed to the IRS; it is one of the few tax forms that cannot be filed electronically.
The form itself is a five-page document divided into sections covering:
- Personal informations
- Details of financial donations you have made
- Details of Generation Break Transfers
Form 709 is an annual return. Form 709, along with the rest of your tax return, is due before the annual filing deadline. For most tax years, the annual filing deadline is April 15. Generally, you must file Form 709 no earlier than January 1, but no later than April 15 of the year following the donation.
If you think you need more time to prepare your return, you can request a tax extension. Filing an extension gives you until October 15 to finalize your return. You can request a six month extension for filing Form 709 by completing IRS Form 8892. It is important to note that this form only covers extensions for gift taxes or generation break tax returns. If you need an extension to file the rest of your tax return, you will also need to complete IRS Form 4868.
Download here Form 709: United States Gift (and Generation Transfer) Tax Return
Form 709 is available for download from the IRS website. This form can be downloaded free of charge and used when filing your income tax return to declare taxes on donations and tax exemptions by generation jump. Although the form is five pages long, you may not need to complete all of the sections, depending on the information you are reporting for the year.
Filling out and completing Form 709 can be confusing if you are unfamiliar with tax laws, so you may want to consult a tax professional before finalizing your return.
If you complete a paper return and print a copy of Form 709, you can send them both to the IRS at this address: Department of the Treasury, Internal Revenue Service Center Kansas City, MO 64999.