Does part of your family’s financial planning include gifting? If so, here are a dozen tips to follow:

  1. Annual gift exclusion is $15,000 per year by an individual to another individual, or
  2. Annual gift exclusion is $30,000 per year gifted jointly from a married couple to another individual (assuming the gift is joint property). However, a Form 709 is required if the gift is in excess of $15,000 and only from assets belonging to one spouse (typically gift-splitting would be elected on the Form 709 to take advantage of the $15,000 annual exclusion for both spouses).
  3. Gifts in excess of the annual exclusion amounts noted above are reported by filing a Form 709 United States Gift (and Generation-Skipping Transfer) Tax Return. The giver is responsible for filing the tax return.
  4. The receipt of a gift from another is not taxable income to be reported by the receiver of the gift.
  5. Gifting is tracked and reported on a calendar year (and not through April 15 of the following year as IRA contributions are tracked).
  6. A gift in the form of a check payment is not considered a gift until the check is cashed and clears the bank. Be careful with gifts made near the end of the year – i.e., if a check is given to your grandchild on December 31, 2019 but not deposited into the child’s bank account until January 2, 2020, then the gift would be considered a calendar year 2020 gift.
  7. Gifts are not a charitable deduction.
  8. For gift tax purposes, payments made directly to an educational institution or medical facility for another person’s respective tuition or medical expenses are not reportable gifts even if the amounts exceed the annual gift exclusion amount.
  9. Gifts to a political organization in excess of the exclusion amount are not reportable gifts (nor are they deductible charitable gifts).
  10. Individuals are allowed to gift into a 529 plan $75,000 ($150,000 jointly) in a calendar year – being a frontloaded gift of 5 years – and spread the gift over the following 4 years. The filing of a gift tax return is required to report this gift, but will fall under the annual exclusion threshold.  Additional gifts to such individuals over the next 4 years would be considered a reportable gift.
  11. Non-cash gifts are gifted at the fair market value as of the date of the gift, not the giver’s basis. (Be aware of the gifting rules when the property is eventually sold by the receiver of such gifts.)
  12. If an individual receives a gift (or multiple gifts in a calendar year) from a nonresident alien or foreign estate and the total of the gifts received from that foreign individual or entity exceeds $100,000 in a calendar year, the individual/receiver is required to file Form 3520 Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.