Filing Gift Tax Returns May Be Beneficial

December 6th, 2025 at 7:03 AM

The givers of gifts (donors), not the recipients (donees), file gift tax returns.

If you give money or property, you may be legally required to file a gift tax return with the IRS—even if you owe no gift tax.

In fact, most people who file gift tax returns do not pay any gift tax because each individual has a generous lifetime gift tax exemption of $13.99 million (for 2025). Married couples can effectively double this amount by combining their exemptions.

Even when no tax is due, you must file a gift tax return whenever you make a “reportable gift.” This allows the IRS to track both the total amount you have gifted during your lifetime and the remaining balance of your lifetime estate and gift tax exemption.

You are required to file a gift tax return if you do any of the following:

• Give any one person more than the annual exclusion amount ($19,000 in 2025).
• Elect to split gifts with your spouse.
• Make a gift of a future interest, such as certain transfers to a trust.
• Front-load multiple years of contributions into a Section 529 plan.
• Give certain types of gifts to your spouse.

If you must file a gift tax return, you also need to report any charitable gifts made during the year. These charitable gifts are not subject to gift tax and do not reduce your lifetime exemption, but you must disclose them on the gift tax return.

Gift tax returns are due at the same time as your income tax return. However, they must be filed separately on paper, as joint gift tax returns do not exist—each spouse must file individually.

Your return must include detailed information for each reportable gift, including its fair market value. Gifts that are difficult to value, such as business interests, require either a professional appraisal or a thorough explanation of how you determined the value.

The IRS may impose a failure-to-file penalty of 5 percent per month if you do not file a required gift tax return. But this penalty applies only when you owe gift tax, which is uncommon.

When no penalty applies, it is still wise to file a gift tax return when required. Filing starts the three-year statute of limitations during which the IRS may question your valuations.

Without a filed return, the IRS has no time limit to challenge the value of your gifts. Filing also provides a clear record of your gifting history and helps you track your remaining lifetime exemption.

Mark S. Fineberg, CPA