How Much Is the Gift Tax in New Jersey?

New Jersey does not have a state-level gift tax. This tax was officially repealed, meaning residents are not required to pay taxes to the state specifically for giving gifts, regardless of the amount. This change became effective on January 1, 2018. Before this repeal, New Jersey also eliminated its separate estate tax.

Despite the repeal of the state gift tax, residents must consider two other tax implications when transferring assets. The first is New Jersey’s Inheritance Tax, which can apply to gifts made shortly before death. The second is the federal gift tax, a separate system that applies to all United States citizens.

New Jersey Inheritance Tax and Gifts

New Jersey’s Inheritance Tax is a distinct tax levied on the recipient of an inheritance based on their relationship to the deceased. While not a direct tax on gifts, it contains a provision that affects gifts made shortly before the giver’s death. This “in contemplation of death” rule establishes a three-year lookback period. Any gift made within three years of the donor’s death is presumed to be in anticipation of death and is included in the decedent’s estate for inheritance tax purposes.

The tax owed depends on the beneficiary’s classification into different classes, each with its own tax rates and exemptions. Class A beneficiaries, which include a spouse, domestic partner, parents, grandparents, and children, are completely exempt from the inheritance tax.

Class C beneficiaries include siblings of the decedent and the spouse or civil union partner of a child of the decedent. For this group, the first $25,000 of inherited assets is exempt from the tax. Amounts exceeding this exemption are taxed at rates ranging from 11% to 16%.

Class D beneficiaries include anyone not in Class A or C, such as nieces, nephews, and friends. This class has no exemption, though transfers under $500 are not taxed. The rate is 15% on the first $700,000 and 16% on any amount thereafter. Finally, Class E beneficiaries, which consist of qualified charities and government entities, are also fully exempt from the inheritance tax.

Federal Gift Tax Rules for NJ Residents

Residents of New Jersey, like all U.S. citizens, are subject to federal gift tax rules. These regulations are entirely separate from any state-level inheritance tax. The federal system allows individuals to give a certain amount to others each year without any tax consequences through the annual gift tax exclusion. For 2025, this amount is $19,000 per recipient. A person can give this amount to unlimited individuals annually without a filing requirement.

When a gift exceeds the annual exclusion, tax is not immediately due. The excess is applied against the donor’s lifetime gift tax exemption, a unified credit linked with the federal estate tax. For 2025, the lifetime exemption is $13.99 million per individual. A gift tax is only owed when this lifetime amount has been fully used.

For example, if a person gives $50,000 to their friend in 2025, the first $19,000 is covered by the annual exclusion. The remaining $31,000 is taxable but will not result in an out-of-pocket tax payment. Instead, that $31,000 is subtracted from their $13.99 million lifetime exemption, leaving them with $13,959,000 for future gifts or their final estate.

Certain types of gifts are completely exempt from the federal gift tax, regardless of the amount transferred. Payments made directly to a medical facility for someone else’s healthcare costs are not considered taxable gifts. Similarly, tuition payments made directly to an educational institution on behalf of a student are also exempt. These specific exemptions do not count against either the annual exclusion or the lifetime exemption.

Filing a Federal Gift Tax Return

If an individual makes a gift that exceeds the annual exclusion limit, they are required to report it to the IRS. This is done even if no tax is actually owed because the amount is covered by the lifetime exemption. The primary purpose of filing is to track the reduction of the lifetime exemption amount over time. The donor, not the recipient of the gift, is responsible for filing the return.

The donor must provide their name, address, and taxpayer ID, along with the same information for the recipient and a description of the gift. For property gifts, its fair market value at the time of transfer must be determined, which may require a formal appraisal. This report is filed using IRS Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return.

The deadline for filing Form 709 is April 15 of the year following the year in which the gift was made, aligning with the standard income tax filing deadline. An extension to file can be requested, which usually pushes the deadline to October 15. This is an extension to file the form, not an extension to pay any tax that might be due. Since New Jersey has no state gift tax, there is no corresponding state-level form to file.