Only individuals file gift tax returns using form 709 which are due at the same time as form 1040. The current maximum gift tax rate is 40% and is paid by the donor of the gift. Each person has an $11.7 million lifetime exclusion before any gift tax is owed. However the IRS wants you to report any gifts over $15,000 in a calendar year (taxable gifts) on form 709 even though no tax is due. What constitutes a taxable gift over the annual exclusion of $15,000? It can be cash, a below market sale, property, debt forgiveness, and a creation of a joint tenancy. A taxable gift does not include a direct payment of tuition and medical care for another person to the provider. There is also a generation skipping tax (GST) on all gifts to grandchildren or an unrelated person more than 37.5 years younger than the donor at the maximum 40% gift tax rate. This is in addition to the regular gift tax on the transfer. The GST rarely comes into play because everyone also has a lifetime $11.7 million GST exemption.
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