How to Report a Gift on Your Taxes

The federal government views a gift as any transfer to an individual where the giver, or donor, does not receive something of at least equal value in return. This definition can include transfers of cash, property, or the use of or income from property. The core principle is that the transfer is made without the expectation of receiving full consideration.

It is the donor who holds the responsibility for reporting these transfers to the Internal Revenue Service (IRS) and for paying any potential tax. The recipient of the gift, known as the donee, generally does not have a federal tax obligation from the act of receiving the gift.

Determining if You Need to File a Gift Tax Return

A primary factor in determining the need to file a gift tax return is the annual gift tax exclusion, which is $19,000 per recipient for 2025. A person can give up to this amount to any number of individuals each year without a filing requirement. A gift tax return is required if you give any single person an amount that exceeds the annual exclusion for that year. A return is also required for a gift of a “future interest,” which is a gift that the recipient cannot possess or enjoy until a future date or event, regardless of its value.

Married couples can agree to split gifts, which allows them to combine their individual annual exclusions for a single recipient. For 2025, this means a couple could give up to $38,000 to one person. Electing to split gifts necessitates the filing of a gift tax return to formalize the agreement, even if the amount given by each spouse is within their individual exclusion limit.

Certain transfers are not considered taxable gifts and do not require a return or count against the annual exclusion. Payments made directly to an educational institution for someone else’s tuition are exempt. Similarly, payments made directly to a medical facility for an individual’s healthcare expenses are not taxable gifts. Gifts to a U.S. citizen spouse are generally unlimited and not subject to gift tax.

Information and Documentation Needed to File

To report taxable gifts, you must use Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. The form and its detailed instructions are available for download on the official IRS website. Before starting the form, you must gather several key pieces of information for each gift:

• The recipient’s full name, address, and relationship to you.
• A detailed description of the gift and the date it was made.
• The Fair Market Value (FMV) of the gift on the date of the transfer.
• Your adjusted basis in the property.

A component is the Fair Market Value (FMV) of each gift. FMV is the price at which property would change hands between a willing buyer and a seller, with both having reasonable knowledge of the facts. For cash, the value is straightforward, but for assets like stocks or real estate, you may need to reference market prices or obtain a professional appraisal. You must also provide your adjusted basis in the property, which is what you originally paid for it, plus any improvements, less any depreciation.

The information about each recipient and their gifts are entered on Schedule A of the form. This section guides you through calculating the total value of gifts and subtracting any applicable annual exclusions.

The Filing Process for Form 709

The deadline for submitting Form 709 is April 15 of the year following the year in which the gifts were made, which aligns with the standard income tax filing deadline. If you file for an extension on your personal income tax return, the deadline to file Form 709 is automatically extended to October 15. Unlike income tax returns, Form 709 cannot be filed electronically and must be submitted by mail. The mailing address for Form 709 varies, so it is important to check the most current instructions for the precise address.

Filing the return does not mean you will automatically owe tax. The amount of the taxable gift, which is the value that exceeds the annual exclusion, is first applied against your lifetime gift and estate tax exemption. For 2025, this lifetime exemption is $13.99 million per individual. An out-of-pocket gift tax is only due if your cumulative taxable gifts exceed this lifetime amount.

Tax Implications for the Gift Recipient

The recipient of a gift generally does not have to report the gift as income on their tax return or owe any federal tax upon receiving the asset. The responsibility for reporting and paying any applicable tax lies with the donor. The most significant tax consideration for the recipient involves the property’s cost basis. The recipient’s basis in the gifted property is the same as the donor’s adjusted basis, a concept known as “carryover basis.” This will determine the taxable gain if they later sell the property.

For instance, if a person receives stock that the donor purchased for $1,000 and its value is $5,000 at the time of the gift, the recipient’s basis is $1,000. If the recipient later sells that stock for $6,000, they will have a taxable capital gain of $5,000. This differs from inherited property, which receives a “stepped-up basis” to its fair market value at the time of the owner’s death.

An exception to the general rule involves gifts from foreign sources. A U.S. person who receives gifts from a foreign individual or foreign estate that total more than $100,000 in a year must report them to the IRS. This reporting is done on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. The reporting threshold is lower for gifts from foreign corporations or partnerships, set at $19,570 for 2025.