What Is A Gift Tax?

A Gift Tax return is required if you give a "taxable" gift, that is, a gift subject to gift tax reporting. Generally, any gifts in excess of $11,000 per person in a calendar year would be considered taxable gifts. A married couple may elect to split a gift, on Form 709 or 709-EZ, which allows them to give a combined total of $22,000 in one year to an individual without any part of it becoming taxable.

The term "taxable gift" is also a bit misleading, since, in most cases, you do NOT owe a tax with the gift tax return. You are allowed one lifetime unified credit against estate and gift taxes, which allows you to pass property worth $1,000,000 with a unified credit of $345,800 to heirs or others without incurring an actual tax. Each "taxable" gift you give during your lifetime reduces that allowance, dollar for dollar. When the entire $1,000,000 with a unified credit of $345,800 is used up, during your lifetime or when passing property to your heirs when you die, a gift tax or an estate tax, depending on the situation, is due on the excess.