How Much Is Gift Tax in Ohio: Federal Rules & Limits

A gift tax is a federal tax on the transfer of property by one individual to another for less than full value. Ohio does not impose its own state-level gift tax; only federal gift tax regulations apply to Ohio residents.

Understanding Federal Gift Tax

The federal gift tax system operates through an annual exclusion and a lifetime exemption. For 2024, individuals can give up to $18,000 per recipient each year without gift tax implications or reporting requirements. This annual exclusion applies to each person, meaning you can give $18,000 to multiple individuals in the same year without affecting your lifetime exemption. Gifts below this annual exclusion amount do not count against your lifetime exemption and do not require reporting to the IRS.

Gifts exceeding the annual exclusion begin to reduce an individual’s lifetime gift tax exemption. This basic exclusion amount is $13.61 million per individual for 2024. Gifts made above the annual exclusion but within this lifetime exemption do not incur immediate tax. Instead, they reduce the amount that can be passed free of federal estate tax upon the donor’s death. The donor is responsible for paying any gift tax that may be due, not the recipient.

Married couples have flexibility through gift splitting. This allows a married couple to combine their annual exclusions, enabling them to give up to $36,000 to any single recipient in 2024 without using their lifetime exemption. Both spouses must consent to gift splitting for this to apply. This provision can significantly increase the amount of wealth transferred free of tax each year.

Certain transfers are excluded from gift tax regardless of amount. Payments made directly to an educational institution for tuition, or directly to a medical provider for medical expenses, are not considered taxable gifts. Gifts to a U.S. citizen spouse are also unlimited and exempt from gift tax. Gifts made to qualified political organizations and charitable organizations are exempt from federal gift tax.

Reporting Gifts to the IRS

When a gift exceeds the annual exclusion amount, even if no tax is immediately due, it must be reported to the IRS. This reporting is done on IRS Form 709, “United States Gift (and Generation-Skipping Transfer) Tax Return.” The purpose of filing this form is to track the cumulative amount of gifts made over an individual’s lifetime that reduce their lifetime exemption.

Form 709 requires specific details about the gift and the parties involved, including information about the donor and donee, a description of the gifted property, the date the gift was made, and its fair market value at the time of the transfer. While the form tracks the use of the lifetime exemption, actual gift tax is rarely paid unless the total cumulative taxable gifts exceed the $13.61 million lifetime exemption.

The filing deadline for Form 709 is April 15th of the year following the gift. If the donor files an income tax extension, the gift tax return filing deadline is automatically extended. Forms and instructions are available from the IRS website.