Form 709: Gift Tax Return Fundamentals

Tax Professionals' Resource
July 15, 2013 — 1,915 views  
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Everyone is entitled to pay a large amount of tax on gifts such as property or money that exceeds a certain limit. If this gift tax was not present, people would be able to pass on their property in their wills and there would be no death tax at all. This gift tax acts like a backup to the final estate tax that needs to be paid.

What is Form 709?

Form 709 is the document in which you fill in your gift details. It makes the process of paying your taxes easier. If you start filing your taxes from the beginning, a large portion of transfer tax can be reduced. The form is available online, and you can plan out gifts carefully before doing so.

What are the Advantages of Giving Gifts?

Usually, giving property or a large amount of money as a gift to someone has a personal motive behind it. Sometimes, this is a means of planning out your taxes. Giving gifts is a way of helping someone who is in a difficult situation financially.

Even if the situation is not so dire, giving gifts ensure financial security to the receiver. If your gifts are given to minors, then you take advantage of avoiding a large sum in tax. You have an opportunity to exploit the annual exclusion during the process of estate reporting.

Reducing Your Taxable Estate through Gifts

The gift tax annual exclusion allows you to give gifts up to 13,000 dollars (as per 2012) to any number of persons without being liable to tax. You may even double this figure by gifting along with your spouse as a couple.

Gifting for Medical or Educational Needs

Apart from the annual exclusion you have the option of paying for someone else’s educational or medical needs. This comes under the unlimited gift tax exclusion. What you have to watch out for in this option is the fact that the payment must be made to the institution directly, and not to the individual. This is to ensure that people don’t take advantage of a process where an indirect transaction is made.

Gift Tax for Long-term

Your estate tax will not be affected too much in the short-term if you use gift tax exclusion. The taxable estate that you own can become a liability if you have to pay a heavy tax on it. If you keep your money as a form of investment, let’s say as stocks, then once the gift has passed on you do not have to pay any tax on the amount of extra money that you have made from the investment. This is true for any kind of investment, even in the form of land or mutual funds.

Has There Been Any Modification to Gift Tax Law?

The gift exclusion per annum remains to be 13,000 dollars per person as of 2012. If your spouse is not a citizen of the US, the annual exclusion has been increased to 139,000 dollars. The total credit amount as of 2012 is $ 1,772,800 and the skipping transfer rate remains at 35 percent per transaction.

Tax Professionals' Resource