Does Gift Splitting Require a Gift Tax Return?

Gift tax regulations can be complex, especially for married couples planning their finances. Gift splitting is a valuable strategy that allows spouses to combine their individual gift tax exclusions for transfers to third parties. This can significantly increase the amount of assets gifted without triggering immediate tax liability or using their lifetime exemption. Understanding gift splitting and its tax reporting implications is important for wealth transfer.

Gift Tax Fundamentals

The United States imposes a federal gift tax on transfers of money or property from one person to another without receiving full value in return. The IRS defines a taxable gift as any transfer where the donor does not receive equal consideration. Several provisions reduce or eliminate gift tax liability for most individuals.

The annual gift tax exclusion, found in Internal Revenue Code Section 2503, allows an individual to give up to $19,000 to any number of recipients each year without incurring gift tax or reporting requirements. This exclusion applies on a per-donee basis, meaning a donor can give $19,000 to multiple individuals in the same year.

Beyond the annual exclusion, a lifetime gift tax exemption exists, found in Internal Revenue Code Section 2505. For 2025, this exemption allows an individual to transfer up to $13.99 million in assets during their lifetime or at death without incurring federal gift or estate tax. If a gift exceeds the annual exclusion, the excess reduces this lifetime exemption, but no gift tax is typically due until the total lifetime exemption is exhausted. Gifts that fall entirely within the annual exclusion and are “present interests” generally do not require a gift tax return (Form 709) to be filed. However, gifts of future interests may necessitate filing a return even if below the annual exclusion.

The Concept of Gift Splitting

Gift splitting, under Internal Revenue Code Section 2513, allows married couples to effectively double their annual gift tax exclusion when making gifts to third parties. This mechanism treats a gift made by one spouse as if each spouse made half of it, even if only one spouse was the actual source of the funds. Its purpose is to maximize the amount of assets a couple can transfer tax-free to beneficiaries each year.

Through gift splitting, a married couple can collectively gift up to $38,000 to the same recipient in 2025, utilizing both spouses’ annual exclusions. This strategy can be advantageous for couples with substantial assets.

Several conditions must be met for a couple to elect gift splitting. Both spouses must be U.S. citizens or residents at the time the gift is made. They must also be married at the time of the gift and remain unmarried for the remainder of the calendar year, even if they later divorce or separate. Both spouses must provide their consent to split all gifts made by either spouse to any third party during that specific calendar year.

Determining the Need for a Gift Tax Return

Electing to split gifts between spouses generally requires filing a federal gift tax return, Form 709, even if no gift tax is due. This reporting ensures the IRS is aware of the election and can track the use of each spouse’s annual exclusion and lifetime exemption.

A Form 709 must be filed when gift splitting is elected if the total value of gifts made by one spouse to any single donee exceeds that spouse’s individual annual exclusion. For example, if one spouse gifts $30,000 to an individual in 2025, this exceeds the $19,000 annual exclusion for a single donor. Filing Form 709 is necessary to formally split this $30,000 gift, attributing $15,000 from each spouse, which falls within each spouse’s $19,000 annual exclusion.

A gift tax return is also required if any portion of the gift constitutes a “future interest,” regardless of its value. Gifts of future interests delay the recipient’s immediate use or enjoyment of the property, do not qualify for the annual exclusion, and must be reported. Filing Form 709 in these scenarios allows the IRS to track the portion of the lifetime exemption utilized by each spouse.

If a gift is a present interest and falls below the individual annual exclusion, a gift tax return is typically not needed, provided gift splitting is not elected. However, once the decision to split gifts is made, the formal election on Form 709 becomes necessary. This ensures proper accounting for the combined use of annual exclusions and serves as a record for future gift and estate tax calculations.

Preparing and Filing the Gift Tax Return

Once Form 709 is required due to gift splitting, gathering necessary information is the next step. Donors need to compile details about themselves and the donees, including names, addresses, and identifying numbers. A description of each gift, its fair market value at the time of transfer, and the specific date of the gift are also essential for accurate reporting.

To properly elect gift splitting, specific sections of Form 709 must be completed. This includes indicating the election in Part 1, General Information, and providing details about the consenting spouse. The consenting spouse must sign the return to affirm their agreement to split all gifts made by either spouse during the calendar year. Both spouses are jointly and severally liable for any gift tax that may arise from gifts made during the year for which gift splitting is elected.

Form 709 and its instructions are available on the IRS website. After completing the form, it can typically be submitted via mail to the specified IRS address. While electronic filing options for Form 709 are limited, some tax professionals may have access to electronic submission methods.

The filing deadline for Form 709 is generally April 15th of the year following the calendar year in which the gifts were made. An automatic six-month extension can be obtained by filing Form 8892, Application for Automatic Extension of Time to File Form 709 and/or Payment of Gift/Generation-Skipping Transfer Tax. Maintaining records of all gifts made and copies of filed gift tax returns is important for future tax planning and compliance.