Dear Liz: My husband and I have given our daughters gifts over the years, but we have never exceeded the $26,000 gift tax limit for a married couple. Do we need to file IRS Form 709 to split the gifts? If so, how to do we file for past years?
Answer: The gift tax system exists to help prevent wealthy people from transferring large amounts to their heirs during the donors’ lifetimes in an attempt to avoid estate taxes. Each person, however, is allowed to give a certain amount each year to any number of recipients.
The current gift tax exemption is $13,000. Each of you could give each of your daughters $13,000 annually. That means the two of you could give the two of them a total of $52,000 a year without having to file a gift tax return. Tuition or medical expenses you pay directly on behalf of another person do not count toward the limit.
The $13,000-per-recipient limit has been in place since Jan. 1, 2009. The limit was $12,000 from 2006 to 2008 and $11,000 from 2002 to 2005.
Only if donors give more than the annual exemption amount are they required to file gift tax returns. Even then, the givers typically don’t owe gift taxes. The lifetime gift tax exemption is currently $5.12 million. In other words, you would have to give away more than $5 million above and beyond the $13,000 per recipient limit to incur a tax. The lifetime limit is scheduled to fall back to $1 million in 2013, but it will still affect relatively few givers. If you did inadvertently exceed the annual limits, you can talk to a tax pro about filing the 709 form.