What Is Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return?
IRS Form 709 is used to report transfers of assets that may be subject to federal gift tax and certain generation-skipping transfer taxes. This form is used to report taxable gifts you make to others during your lifetime, including gifts of cash or tangible physical assets, such as real estate. It's also used to allocate lifetime generation-skipping tax exemptions when transferring property to a beneficiary (other than a spouse) who is at least 37½ years younger than the donor.
Form 709 should be filed with your tax return for any year in which you make a taxable gift, but filing this form doesn't necessarily mean that you'll owe gift or generation-skipping transfer tax. (The generation-skipping transfer tax is an additional tax on a transfer of property that skips a generation, known as a generation-skipping transfer for short.)
- Form 709 is used to report taxable gifts and generation-skipping tax lifetime exemption allocations.
- Certain types of financial gifts may qualify as exclusions for the gift tax.
- Generation-skipping tax ensures that the proper amount of estate tax is paid when a generation-skipping trust is used to transfer assets among family members.
- Form 709 must be filed each year you make a taxable gift and included with your regular tax return.
Who Can File Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return?
When you make a financial gift to someone, you—not the recipient of the gift—are responsible for paying any gift taxes owed. If you give gifts of cash, property, or other assets to someone during any given tax year, you're required to file Form 709 to report the gift.
On March 17, 2021, the Internal Revenue Service (IRS) announced that the federal income tax filing due date for all taxpayers for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. This only applies to individual federal income returns and tax payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax.
For IRS reporting purposes, a gift is:
"Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return."
Examples of scenarios that may be considered taxable gifts include:
- A gift of down payment funds to an adult child to help them purchase a home
- Cash gifts made directly to a student to help pay for school
- Gifts of real estate or other property you give to someone
- Funds deposited into a 529 college savings account on behalf of a beneficiary other than yourself or your spouse
- Forgiving loans you have made to someone else
There are, however, some scenarios where financial gifts are not subject to the gift tax. These include:
- Gifts that fall within the annual exclusion limit
- Gifts to your spouse
- Tuition or medical expenses you pay on behalf of someone else
- Gifts to a political organization for its use
The annual exclusion limit for 2021 is $15,000; this limit doubles to $30,000 for married couples who file a joint return. The limit applies per recipient, so if you're married and have three children, you and your spouse could jointly gift up to $30,000 to each of them annually without exceeding the exclusion limit. This is called gift splitting, but it's only allowed when you and your spouse file a joint tax return.
Gifts for tuition or medical expenses must be paid directly to the biller to avoid incurring the gift tax. If you want to help out a grandchild with college expenses, for example, you'd need to make tuition payments directly to the school. If, instead, you were to give your grandchild the money to pay their tuition, it would fall under the taxable gift heading. The same is true if you're paying medical expenses. You'd need to pay the healthcare provider directly to avoid gift tax implications.
Gifts to qualifying charities are generally not subject to gift tax and may be deductible on your taxes if you itemize using Schedule A.
How to File Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return
You must file Form 709 for any tax year in which you make a taxable gift unless you're covered by one of the exclusions mentioned previously. If you file your tax returns electronically using online tax preparation software, you cannot complete this form online. Form 709 must be printed and mail to the IRS; it's one of a handful of tax forms that can't be e-filed.
The form itself is a five-page document broken into sections covering:
- Personal information
- Details of financial gifts you made
- Details related to generation-skipping transfers
You'll need to complete your regular Form 1040 before filling out Form 709, as the form requires you to transfer information over from Schedule A and Schedule B. This adds a step to the process since you can't do this automatically with an online tax preparation software program. Form 709, along with the rest of your tax return, is due by the annual filing deadline. For 2021, the date is April 15th.
If you think you'll need more time to prepare your return, you can file for a tax extension. Filing an extension gives you until October 15th to get your return finalized. You can request a six-month extension for filing Form 709 by completing IRS Form 8892. It's important to note that this form covers extensions for gift tax or generation-skipping tax filings only. If you need an extension to file the rest of your tax return, you'd also need to file IRS Form 4868.
The IRS has extended the tax filing deadline to June 2021 for taxpayers in Oklahoma and Texas who were affected by severe winter storms.
Download Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return Here
Form 709 is available for download on the IRS website. This form is free to download and use when filing your tax return to report gift taxes and generation-skipping tax exemptions. While the form is five pages long, you may not need to complete all sections, depending on which information you're reporting for the year.
If you're filing a paper return and printing out a copy of Form 709, you can mail them both to the IRS at this address: Internal Revenue Service Center, ATTN: E&G Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915. You'd send your Form 709 to this same address if you filed the rest of your tax return electronically.
Completing and filing Form 709 may be confusing if you're unfamiliar with tax laws, so you may want to consult a tax professional before finalizing your return.