Wisconsin Gift Tax Rules for Residents

A gift tax is a levy on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. For residents of Wisconsin, navigating the rules surrounding such transfers requires an awareness of regulations at both the state and federal levels. The structure of these tax laws can influence how and when individuals choose to give significant assets.

The Status of Wisconsin’s State-Level Transfer Taxes

Wisconsin does not impose a gift tax. This tax on transfers made during a person’s lifetime was repealed, effective January 1, 1992. Consequently, giving money or property, regardless of the amount, does not trigger a state-level tax liability or filing requirement for the donor in Wisconsin.

This approach aligns with the state’s treatment of transfers at death. Wisconsin also eliminated its inheritance tax, which was a tax imposed on heirs receiving property from a deceased person’s estate. This repeal applies to deaths that occurred on or after January 1, 2008.

Federal Gift Tax Obligations for Wisconsin Residents

While Wisconsin does not have a gift tax, its residents are still subject to federal gift tax law. A primary component of this system is the annual gift tax exclusion. For the 2025 tax year, an individual can give up to $19,000 to any number of people without any tax consequences or filing requirements. A married couple can combine their exclusions to give up to $38,000 to a single recipient.

If a gift to a single individual exceeds the annual exclusion amount, it may still not be subject to an immediate tax. The federal government provides a lifetime gift tax exemption, which for 2025 is set at $13.99 million per person. When a gift surpasses the annual exclusion, the excess amount is subtracted from the donor’s lifetime exemption. The tax, with rates up to 40%, is only due when an individual’s cumulative gifts that exceeded the annual limits surpass the total lifetime exemption.

The donor is responsible for paying any federal gift tax that may be due, not the recipient. A taxable gift is any transfer of property or money where the donor does not receive something of at least equal value in return. This can cover direct cash payments, real estate, or stock holdings.

Filing the Federal Gift Tax Return

A federal filing obligation is triggered when a donor’s gifts to any single person in a calendar year exceed the annual exclusion amount. For 2025, this means a return is needed if you give more than $19,000 to one individual. This requirement exists even if no tax is owed because the excess gift amount is absorbed by the donor’s lifetime exemption. The purpose of the return is to track the use of this lifetime exemption over time.

The document for this purpose is IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. This form is used to report all gifts subject to the tax and to calculate the lifetime exemption used. Each individual donor must file their own Form 709; joint returns are not permitted for gift taxes.

The deadline for filing Form 709 is April 15 of the year following the year in which the gift was made. An extension to file your federal income tax return, requested using Form 4868, will also automatically extend the deadline for filing Form 709.

Wisconsin Income Tax Considerations for Gifts

The tax implications of a gift in Wisconsin extend into the realm of income tax for the recipient. The asset is not considered taxable income at the state level at the time of receipt. This means the recipient does not need to report the gift on their Wisconsin income tax return.

A consideration arises when the recipient later decides to sell a gifted asset, such as stock or real estate. For Wisconsin income tax purposes, the recipient must use the donor’s original cost basis to determine the capital gain on the sale. This is known as a “carryover basis.” This rule is a factor in financial planning, as gifting highly appreciated assets can result in a future income tax liability for the recipient upon its sale.

For example, if a parent gifts stock they purchased for $5,000 that is now worth $25,000, the recipient’s basis in that stock is $5,000. If the recipient sells that stock for $30,000, their taxable capital gain for Wisconsin income tax purposes would be $25,000. This is the sale price minus the original $5,000 carryover basis.