You can’t prepare or e-file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return in our program.
Form 709 is a separate federal gift tax return. It isn’t part of your Form 1040 individual income tax return, and you shouldn’t attach it to your Form 1040.
The IRS now accepts Form 709 electronically through its Modernized e-File, or MeF, system. However, electronic filing requires compatible gift tax software or an authorized tax professional that supports Form 709. If you don’t have access to one of those options, you can prepare the form separately and mail it to the IRS.
What Is Form 709 Used For?
Form 709 is generally used to report:
- Gifts subject to federal gift tax reporting
- Certain generation-skipping transfers, often called GST transfers
- Allocation of the lifetime generation-skipping transfer exemption
- Gifts for which spouses elect to split the gift
- Certain gifts of future interests
- Certain transfers to trusts
- Use of part of the donor’s lifetime gift and estate tax exclusion
The donor, meaning the person who made the gift, generally files Form 709. The person receiving the gift usually doesn’t file Form 709 or pay federal gift tax merely because they received a gift.
A gift can include more than cash. A gift may occur when you transfer money or property, allow someone to use property or receive its income, sell property for less than fair market value, or make an interest-free or below-market loan without receiving equal value in return.
Do I Need to File Form 709 for a Gift Made in the Tax Year?
You may need to file Form 709 if, during the year, you:
- Gave one person more than the annual gift tax exclusion;
- Gave a gift of a future interest, even if its value was below the annual exclusion;
- Made a gift to a trust that doesn’t qualify as a present-interest gift;
- Elected to split a gift with your spouse;
- Gave certain property to a spouse who isn’t a U.S. citizen;
- Made a direct or indirect generation-skipping transfer; or
- Need to allocate generation-skipping transfer exemption.
The annual exclusion applies separately to each recipient. Giving more than the annual exclusion to one person generally doesn’t mean you immediately owe gift tax. Instead, the excess may reduce your remaining lifetime gift and estate tax exclusion.
The basic exclusion amount is $15 million. This is the total lifetime exclusion before considering prior taxable gifts and other adjustments.
Which Gifts Usually Don’t Require Form 709?
You generally don’t need to report:
- A present-interest gift that doesn’t exceed the annual exclusion for that recipient
- A qualifying gift to a U.S. citizen spouse
- A qualifying charitable contribution
- Tuition paid directly to an eligible educational institution for another person
- Medical expenses paid directly to the medical provider for another person
The tuition and medical exclusions apply only when payment is made directly to the school or medical provider. Giving the money to the individual first generally doesn’t qualify for this special exclusion.
Other reporting rules may still apply to trusts, generation-skipping transfers, gifts to a spouse who isn’t a U.S. citizen, and gifts involving foreign persons or property.
Does Filing Form 709 Mean I Owe Gift Tax?
Not necessarily. Many taxpayers file Form 709 to report a gift and document the use of part of their lifetime exclusion, but don’t owe gift tax with the return. Gift tax generally becomes payable only after taxable lifetime gifts exceed the donor’s available exclusion, although certain generation-skipping transfers can follow different rules.
The federal gift and generation-skipping transfer tax rate can reach 40%. The exact calculation depends on prior taxable gifts, the current transfer, available exclusions, deductions, and credits. The IRS’s Form 709 instructions include the applicable calculation tables.
Can I E-file Form 709?
Yes, the IRS accepts Form 709 through Modernized e-File. Form 709, Form 709-NA, and Form 8892 are among the gift tax forms supported by the IRS MeF system.
However, our program doesn’t support Form 709. You can’t:
- Prepare Form 709 in the program
- Attach Form 709 to your Form 1040
- E-file Form 709 with your individual income tax return
- Pay gift tax through the program
If you want to e-file, you’ll need compatible professional tax software or an authorized provider that supports gift tax returns. Otherwise, complete Form 709 separately and mail it using the address in the final instructions for the applicable tax year.
When Is Form 709 Due?
A Form 709 reporting gifts is generally due by the April 15th deadline. The IRS states that gift tax returns are normally due April 15 following the year in which the gift was made.
If the regular due date falls on a weekend or legal holiday, the due date generally moves to the next business day.
An extension of time to file your federal income tax return may also extend the time to file Form 709. If you don’t need an income tax extension, Form 8892, Application for Automatic Extension of Time To File Form 709 and/or Payment of Gift/Generation-Skipping Transfer Tax, may be available.
An extension to file generally doesn’t extend the time to pay gift or GST tax. Any expected tax should be paid by the original due date to reduce possible interest and penalties.
What Should I Include With Form 709?
Depending on the gift, supporting documents may include:
- A copy of the appraisal
- Documents describing the transferred property
- Trust agreements
- Deeds or ownership records
- Documents showing the donor’s adjusted basis
- Valuation reports
- Restrictions affecting the property’s value
- Prior gift tax returns
- Explanations of discounts or special valuation positions
- Consent information for a gift-splitting election
Property generally must be reported at its fair market value on the date of the gift. Fair market value is usually the price at which the property would change hands between a willing buyer and willing seller when neither is forced to act and both understand the relevant facts.
Complex or hard-to-value gifts, such as business interests, real estate, cryptocurrency, trust interests, or privately held stock, may require a qualified appraisal and professional tax advice.
Can Married Couples File One Form 709 Together?
No. Form 709 isn’t a joint return. Each spouse who is required to file generally submits a separate Form 709. This remains true when spouses elect to treat a gift made by one spouse as made one-half by each spouse, commonly called gift splitting.
Gift splitting has detailed consent and filing requirements. Both spouses may need to file their own returns, even if only one spouse transferred the property.
Can I Claim a Gift as a Deduction on My Income Tax Return?
Personal gifts generally aren’t deductible on your individual income tax return.
Form 709 reports gifts for gift and generation-skipping transfer tax purposes. It doesn’t create an income tax deduction for money or property given to family members, friends, or other individuals.
Qualifying charitable donations are different. They may be deductible on an income tax return when the contribution and taxpayer meet the applicable charitable deduction rules.
Is Form 709 a Business Tax Return?
No. Form 709 is an individual gift tax return, not a partnership, S corporation, C corporation, estate, or trust income tax return.
The original article grouped gift and business tax returns together. That wording could be confusing. Our program doesn’t support Form 709 or business entity returns, but those forms involve different taxes and filing rules.
Forms commonly associated with entity returns include:
- Form 1065 for partnerships
- Form 1120-S for S corporations
- Form 1120 for C corporations
- Form 1041 for estates and trusts
A business entity may issue a Schedule K-1 to an owner or beneficiary. Although the program can’t prepare the entity’s return, you can generally report a Schedule K-1 you received on your individual income tax return.
Schedule K-1: Program Entry
To report a Schedule K-1 you received:
- Select Federal.
- Select Income, then Select My Forms.
- Select Less Common Income.
- Select K-1 Earnings.
- Choose the appropriate Schedule K-1 form.
Select the K-1 based on the entity that issued it:
- Schedule K-1 from Form 1065 for a partnership
- Schedule K-1 from Form 1120-S for an S corporation
- Schedule K-1 from Form 1041 for an estate or trust
A Schedule K-1 is unrelated to whether you must file Form 709. Receiving a K-1 reports your share of an entity’s tax items; it doesn’t report a personal gift.
What Form Applies to a Donor Who Isn’t a U.S. Citizen or Resident?
Form 709 generally applies to U.S. citizens and residents for federal gift tax purposes. Gift tax residency is based largely on domicile, which isn’t necessarily the same as income tax residency or immigration status.
A donor who is neither a U.S. citizen nor a U.S. resident may need Form 709-NA, United States Gift (and Generation-Skipping Transfer) Tax Return of Nonresident Not a Citizen of the United States, for certain transfers of U.S.-situated real or tangible property.
Because citizenship, domicile, property location, and property type can change which form applies, nonresident gift tax situations often require professional review.