When you make a gift to an irrevocable trust or to an individual other than your spouse, you’re generally required to file a gift tax return. But what is a gift tax return? This article provides context on how the estate and gift tax system works, and then explains what gift tax returns are, why they have to be filed, and when they have to be filed.
The Federal Estate Tax
It’s hard to explain why gift tax returns exist without giving some background on the estate and gift tax system more broadly. The federal estate tax is a tax on the assets that a person leaves to their heirs when they pass away. The estates of U.S. citizens and residents are taxed on all of their worldwide assets — including real estate, retirement accounts, brokerage accounts, crypto, intellectual property, and whatever else a person owns. The federal estate tax rate is a flat 40%, and any tax is due within nine months of a person’s death.
Each individual has a basic exclusion amount, sometimes called a lifetime exemption. The exemption is large; it’s the reason most Americans never owe any estate tax. In 2025, the exemption is $13.99 million (up from $13.61 million in 2024). It is adjusted for inflation, so it usually increases on January 1, but under current law it is scheduled to be cut in half to about $7 million on January 1, 2026.
The Federal Gift Tax
The federal gift tax is the other side of the estate and gift tax system. It is a tax on gifts made during the giver’s lifetime. Like the federal estate tax, it is levied at 40%, and it shares the same lifetime exemption amount with the estate tax. So, if you use $3 million of your gift tax exemption during your lifetime and you die in 2025, your estate tax exemption will be $10.99 million.
What is a Gift Tax Return?
A gift tax return (Form 709) is a tax form that individuals are required to file whenever they make a gift to someone in excess of the gift tax’s annual exclusion amount ($19,000 in 2025). The form reports the fair market value of the gift, the assets gifted, the date of the gift, the name of the recipients, and other related information.
Why Do They Have to be Filed?
Gift tax returns exist so that the IRS can track how much of your lifetime gift tax exemption you’ve used during your lifetime. That’s an important metric because it affects both how much estate tax exemption you’ll have left when you die and also whether you’re already over the lifetime exemption amount and therefore owe gift tax now.
When Do They Have to be Filed?
Gift tax returns are due the year after a reportable gift is made. The normal due date is April 15, but taxpayers can easily get an extension to October 15. In fact, when someone extends their income tax return, it automatically extends the due date for their gift tax return. It’s also possible to extend your gift tax return without extending your income tax return by filing Form 8892.
How Do I Prepare and File a Gift Tax Return?
Gift tax returns are fairly complicated, so you won’t be able to prepare one by yourself (at least not correctly). Most people pay accountants or attorneys to prepare them. But if you have a trust with Valur, and you make a gift to that trust, we’ll prepare your gift tax return for you. Filing a gift tax return is easy. You’ll have to sign the return and then mail it to the IRS.
About Valur
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