12 States With the Biggest Federal Gift Tax Bills

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Some Americans get through the gift tax maze, file the required gift tax returns and, in some cases, pay the required gift taxes.

U.S. taxpayers filed more than 500,000 gift tax returns in 2023, with the average amount paid per return ranging from $26, in Alaska, up to more than $24,000, in one New England state.

The median was about $2,300.

For the 12 states with the highest average gift tax amount per gift tax return, see the gallery above.

For data for all 50 states and the District of Columbia, along with the national totals calculated by the IRS, see the chart below.

What it means: Clients, and even many financial services professionals, may have only a vague idea that the federal gift tax exists, let alone how it works.

But understanding the gift tax system is key to creating audit-resistant estate plans.

Talking about the topic may create opportunities to review overall planning goals and funding arrangements and, possibly, to discuss funding strategies based on life insurance, separately managed accounts, trusts, and other types of financial instruments and legal arrangements.

Gift tax basics: The government came up with the tax to keep wealthy people from using constant streams of cash gifts to evade paying the federal estate tax.

In 2024, the givers must report gifts when the value exceeds $18,000 per year per recipient for an individual giver and $36,000 for a couple.

Taxes are due only when the total lifetime value of the gifts given exceeds $13.61 million for an individual giver and $27.22 million for a couple.

The total excludes cash spent on most gifts under the annual exclusion limit, college tuition, medical expenses, gifts to a spouse, gifts to a political organization and gifts to qualifying charities.

But some taxpayers are supposed to pay the gift tax. One question is how many people who should pay the gift tax even know the tax exists, let alone file returns or pay the required taxes.

Josephine Bonaffini, a Boston attorney, looked at sample returns in 2011 and found that only 10% to 40% of the taxpayers who should have filed gift tax returns did so.

Data details: The latest individual tax return figures, from the Internal Revenue Service data book for 2023, show that taxpayers filed a total of 516,991 gift tax returns, compared with 49,633 estate tax returns and 211 million individual and employment tax returns.

Taxpayers paid $1.7 billion in gift taxes. That’s a small relative to the $34 billion in estate taxes paid and the $4.1 trillion in individual and employment taxes paid.

The 50-state totals are lower than the national totals calculated by the IRS because the IRS totals include gift taxes paid by the residents of U.S. territories and U.S. residents living outside the United States.

Credit: Adobe Stock

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