Preparing for the 2023 Gift Tax Return Deadline
Posted by Cheryl A. Jankowski on February 13, 2024
In anticipation of the 2023 gift tax return deadline, individuals who have made substantial gifts to beneficiaries such as children, grandchildren, or others in the previous tax year must assess their obligation to file a gift tax return. While filing may not always be mandatory, there are instances where it can be advantageous to do so.
Mandatory Filing Requirements
The determination of whether an individual must file a gift tax return hinges on several factors. For the tax year 2023, the annual gift tax exclusion stood at $17,000 per recipient, with specific conditions necessitating filing, including:
- Gifts surpassing the $17,000-per-recipient annual exclusion (excluding gifts to a U.S. citizen spouse).
- Gifts intended to be split with a spouse to leverage the combined $34,000 annual exclusion.
- Gifts exceeding the $175,000 annual exclusion for noncitizen spouses.
- Contributions to a Section 529 college savings plan aiming to front-load up to five years' worth of annual exclusions ($85,000) into 2023.
- Transfers of future interests, regardless of amount, such as remainder interests in trusts.
- Gifts involving jointly held or community property.
It's crucial to note that gift tax liability arises only when an exclusion is inapplicable, and the lifetime gift and estate tax exemption (set at $12.92 million for 2023) has been exhausted. Consequently, certain transfers necessitate filing a return, even if no tax is owed.
Voluntary Filing Considerations
While no obligation exists to file if gifts qualify for tax-free treatment under specific categories like annual exclusion gifts or direct payments for educational or medical expenses, individuals dealing with hard-to-value assets like artwork or interests in family-owned businesses should contemplate filing a gift tax return. Such voluntary filing ensures adequate disclosure of transfers, initiating the statute of limitations and limiting IRS challenges to valuations.
Deadline Reminder
The deadline for filing the gift tax return coincides with the income tax filing deadline. For the 2023 tax year, this falls on Monday, April 15, 2024, with an extension granting until Tuesday, October 15, 2024. However, it's crucial to note that if gift tax is owed, payment must be made by April 15, irrespective of extension filings. Individuals unsure about their filing obligations or considering the voluntary submission of a 2023 gift tax return should seek guidance to ensure compliance with IRS regulations.
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Cheryl has extensive experience working with business owners and individuals on minimizing taxes, with a focus on succession planning. With a thoughtful approach, Cheryl helps clients explore their long-term goals and plan accordingly. Leveraging Cheryl’s expertise in this area, the goal is to implement plans that achieve the wishes of the client and provide for tax-efficient transitions. Cheryl’s passion for working with corporations and individuals has allowed her to become a trusted business advisor. She has worked with clients not only in the Western New York region but also throughout the country. The breadth of this experience has allowed her to collaborate with other professional advisors to ensure that plans are flexible and innovative in the ever-changing world in which we live. Cheryl started her career with the Firm in 1991 and rejoined in 2019 adding additional strength to the tremendous talent of the Lumsden McCormick tax team.