The federal gift tax is an excise tax on the right to transfer property during life.
1 The donor is generally responsible for paying the gift tax. The payment of the gift tax by the donor is not treated as a gift. The gift tax is a cumulative tax and the tax rates are progressive. Gifts made in prior years are taken into account in computing the tax on gifts made in the current year with the result that later gifts are usually taxed in a higher bracket than earlier gifts (a drop in tax rates could obviate this result). Moreover, the tax is a
unified tax; the same tax that is imposed on taxable gifts is imposed on taxable estates. The maximum gift tax rate for 2011 and 2012 was 35 percent. Under the American Taxpayer Relief Act of 2013, the top estate and gift tax rate increased to 40 percent, and the exclusion amount was set at the $5 million level, as indexed for inflation annually to $5.49 million in 2017. The 2017 Tax Act raised the exemption amount to $11.18 million in 2018, $11.4 million in 2019, $11.58 million in 2020, $11.7 million for 2021, $12.06 million for 2022, $12.92 million for 2023 and $13.61 million in 2024 .
2 A gift tax return (Form 709), if required, must generally be filed by April 15 of the year following the year in which the gift was made. A six-month extension for filing is available. Tax is generally due by April 15, but certain extensions for payment may be available. See Q 915.
The Federal Gift Tax Worksheet, below, shows the steps for calculating the gift tax. Calculation starts with determining what constitutes a gift for gift tax purposes (see Q 893). In general, gifts include gratuitous transfers of all kinds. Two spouses can elect to have all gifts made by either spouse during the year treated as made one-half by each spouse ( Q 904). A qualified disclaimer is not treated as a gift ( Q 895).
Gifts are generally valued at fair market value on the date of the gift ( Q 916). Special rules apply for a wide variety of investments and to net gifts ( Q 900), and Chapter 14 special valuation rules apply to transfers to family members of certain interests in corporations, partnerships, or trusts ( Q 934).
