The Gift Tax Explained - What You Need to Know

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What Is a Gift Tax?
The gift tax is a federal tax applied to an individual giving anything of value to another person. For something to be considered a gift, the receiving party cannot pay the giver full value for the gift, though they may pay an amount less than its full value.

The gift donor must report the gift on their tax return and pay the gift tax. Normally, the recipient doesn’t have to report the gift. Under special circumstances, the recipient may pay the gift tax.

Frequently Asked Questions on Gift Taxes

What Is a Unified Tax Credit?
A unified tax credit is a certain amount of assets that each person is allowed to gift to other parties without having to pay gift, estate, or generation-skipping transfer taxes. The credit is afforded to every man, woman, and child in America by the Internal Revenue Service (IRS).

Large Gifts or Bequests from Foreign Persons

If you are a U.S. person (other than an organization described in section 501(c) and exempt from tax under section 501(a)) who received large gifts or bequests from a foreign person, you may need to complete Part IV of Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, and file the form by the 15th day of the fourth month following the end of your income tax year (generally, April 15th for individuals), subject to any extension of time to file that may apply. If you file Form 3520 late, or if the information provided is incomplete or incorrect, the IRS may determine the income tax consequences of the receipt of such foreign gift or bequest and you may be subject to penalties if you do not have reasonable cause. For more information, see the instructions to Form 3520.

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#GiftTax #TaxPlanning #EstateTax
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DISCLAIMER:
This video is for entertainment purposes only. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video.

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[leighdevereaux]

How EXACTLY do I get the rich, Canadian uncle? Let’s start with that and worry about the taxes later. Great video, Jake. Love your lessons.

[alanyoung]

As I'm getting older, learning about taxes seems to be the next step in "adulting". Great video jake!

[thGenNativeTexan]

This is the most concise, to the point, clearly explained information on this topic I've seen.. and the use of visuals is gold. Thanks so much!

[gmur]

Great video Jake. I am a financial planner and deal with estate tax all the time.

For the $300k gift example Mom and Dad can and should elect to “gift split”. This means if dad is the gifter he can use mom‘s annual exclusion and can gift $30, 000 to their child without using any of their unified credit. So they would report $270, 000 on tax form 709 instead of $285, 000.

Several states also have an estate tax on the state level. Massachusetts has the lowest exemption amount of “just” $1 million per person!

[mnphoneemail]

You mentioned Form 709 is a one page document. In actuality it is a five page form. Form 709 is very complicated, especially when splitting and giving to others, grand children or having to deal with community property or Deceased Exclusions. Plus, for every year you file you also have to track the gifts reported on prior Form 709, a very complicated calculation. The instructions are 21 pages. The chances of a DIYer getting it correct are slim.

[UPEASTHAITIANZ]

The shawshank redemption movie has a scene about gift tax. Tim Robbins and the corrections officer.

[johngender]

Thanks again for another great video Jake. You always explain these topics very clearly.

[MARIAGUILLEN-kpgi]

Great video thanks for explaining this! Currently studying for my federal tax class! 😊

[deviambati]

Hello Jake, I really wonder your depth of knowledge in various financial matters. Awesome video. Thank you again - I am watching most of your videos and trying to learn/understand based on my capability.

[neutralsportsfan]

Great explanation Jake. This is a topic that is heavily tested on the regulation part of the CPA exam and it is really misunderstood.

[ShayLoveNLiv]

Hi Jake! Thank you for another great video. You mentioned the gift could be money or something of value. What if a parent and child purchased a home and the parent wants to gift their ownership in a home to their child. Would this still apply? If not could you make a video about that.

[kitkarson]

2:21 - in this example, Can the donor (mom & dad) deduct their taxable income by $60000 to avoid federal taxes?

[henrygerlits]

Thanks Jake, such a solid video!! Much appreciated

[sickocell]

Great, well explained tax matter. Thank you for this great info

[boyboy-xerx]

Very nice explanation. Very helpful. Thank you.

[imshypleasebenicetome.]

Fuck by my calculations i give about 20k yearly to my mom for housing and food but i gift it to her since i dont really ask how much she needs i just give it to ger for snything the house needs

[derekbenoit]

Thanks for the video. But I would like to mention a following situation: Suppose the IRS sees a discrepancy in the amount of income I declare for taxes and an amount that was deposited in my bank account as a gift. How does the receiver prove to the IRS that the undeclared money was a gift from a family member? Could you run the risk of being audited? If one ran into a problem, it's very difficult to contact the IRS to get this solved in the first place. I might run into this, that's why I mention it. Any help would be appreciated. Derek.

[saidhanchander]

Yeah great video jake always love your videos and I’m happy to share the journey I moved to us in 2019 and I have seen we both had similar journey credit card, stocks I just recently started nfts and crypto would be fun if you allot a little bit of money and see that content just a suggestion

[shanewinters]

So a one time gift from my father of 60k is tax free for both of us? Just fill out a 709 form?

[DNTREPLY]

thankfully in new zealand we got rid of this gift tax in 2011. so we can give out money to family/friends regardless of the amount.