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Apply gift-splitting, the annual exclusion, and the unified credit to gifts
Lifetime gifts use the same unified credit as the estate at death, which is why giving while living can shrink a future estate return. This lesson follows the gift from the spouses' consent to the tax computation: how spouses split a gift, how the annual exclusion subtracts present-interest gifts from the total, and how the unified credit absorbs the tax on what remains.
Gift splitting lets a married couple treat gifts either of them made to third parties as made one half by each spouse. Splitting requires consent and creates shared responsibility: the consenting spouse signs a dated Notice of Consent stating that all third-party gifts are treated as made one half by each spouse, and once the consent is effective the liability for the entire gift tax of each spouse is joint and several. There is no joint gift tax return; where both spouses must report, each files an individual Form 709 with the consent attached. Community property gifts and gifts of jointly held property are already treated as made one half by each spouse, which is why each spouse files in those cases too. A return is due whenever the year calls for one: gifts to someone other than a spouse totaling more than $19,000, any future-interest gift even below $19,000, and any year the couple elects to split gifts regardless of amount.
Ken gives $44,000 from his separate savings to his niece and his wife Rita consents to split. The election treats Ken and Rita each as giving $22,000. Each half then meets Rita's and Ken's own annual exclusions separately. When the consent is effective, both spouses stand jointly and severally liable for any gift tax on the transfer, even though each reports on an individual return.
Form 709 Instructions Page 8
If the consent is effective, the liability for the entire gift tax of each spouse is joint and several.View on the source
Form 709 Instructions Page 8
You must indicate spousal consent for gifts made to third parties to be considered as made one-half by each spouse by using the checkbox, and attaching a Notice of Consent.View on the source
Form 709 Instructions Page 8
Your spouse (the consenting spouse) must sign the Notice of Consent for your gift-splitting election to be valid. The Notice of Consent must be signed and dated by the consenting spouse and must include a statement signifying consent to treat all gifts made to third parties as having been made one-half by each spouse, such as “[Name of consenting spouse] elects to treat all gifts made to third parties as having been made one-half by each spouse.View on the source
Form 709 Instructions Page 2
Spouses may not file a joint gift tax return. Each individual is responsible to file a Form 709.View on the source
Form 709 Instructions Page 2
If a gift is of community property, it is considered made one-half by each spouse. For example, a gift of $100,000 of community property is considered a gift of $50,000 made by each spouse, and each spouse must file a gift tax return.View on the source
Form 709 Instructions Page 2
Likewise, each spouse must file a gift tax return if they have made a gift of property held by them as joint tenants or tenants by the entirety.View on the source
Form 709 Instructions Page 2
If you gave gifts to someone in 2025 totaling more than $19,000 (other than to your spouse), you must generally file Form 709. But see Transfers Not Subject to the Gift Tax and Gifts to Your Spouse, later, for more information on specific gifts that are not taxable.View on the source
Form 709 Instructions Page 2
Certain gifts, called future interests, are not subject to the $19,000 annual exclusion and you must file Form 709 even if the gift was under $19,000. See Annual Exclusion, later.View on the source
Form 709 Instructions Page 2
You must file a gift tax return to split gifts with your spouse (regardless of their amount) as described in Part III Spouse’s Consent on Gifts to Third Parties, later.View on the source
Maya and Luis were married to each other for all of 2025. Maya gave $60,000 cash outright to her nephew. They file timely Forms 709 with a signed, dated Notice of Consent electing to split gifts. How much of the gift is each spouse treated as giving?
The annual exclusion subtracts the first $19,000 of gifts of present interest to each donee during the calendar year before taxable gifts are figured. The unit is the donee: three $20,000 present-interest gifts to three friends earn three exclusions. The type of gift decides whether the exclusion applies. A present interest gives the donee all immediate rights to use, possession, and enjoyment; a future interest postpones those rights to some future date, as remainders and reversions do. A future interest earns no annual exclusion. Gifts to a spouse who is not a U.S. citizen follow an enlarged $190,000 exclusion for 2025, provided the $171,000 above the $19,000 base would otherwise qualify for the gift-tax marital deduction, and a contribution to a qualified tuition program for a designated beneficiary counts as a present-interest gift. This lesson measures only the gift tax; when the donee later sells the property, the income-tax basis follows the rule taught in "What the Property Cost".
In 2025 Priya gives $19,000 cash to each of two cousins and deeds a remainder interest worth $50,000 to a third. The two cash gifts are present interests fully excluded at $19,000 each. The remainder is a future interest excluded to the extent of $0, so the full $50,000 stays in total gifts.
Form 709 Instructions Page 4
The first $19,000 of gifts of present interest to each donee during the calendar year is subtracted from total gifts in figuring the amount of taxable gifts.View on the source
Form 709 Instructions Page 4
A gift of a future interest cannot be excluded under the annual exclusion.View on the source
Form 709 Instructions Page 4
A gift is considered a present interest if the donee has all immediate rights to the use, possession, and enjoyment of the property or income from the property. A gift is considered a future interest if the donee’s rights to the use, possession, and enjoyment of the property or income from the property will not begin until some future date. Future interests include reversions, remainders, and other similar interests or estates.View on the source
Form 709 Instructions Page 4
Note: For gifts made to spouses who are not U.S. citizens, the annual exclusion has been increased to $190,000, provided the additional $171,000 gift (above the $19,000 annual exclusion) would otherwise qualify for the gift tax marital deduction (as described in the Schedule A, Part 4, line 4, instructions, later).View on the source
Form 709 Instructions Page 4
A contribution to a QTP on behalf of a designated beneficiary is considered a gift of a present interest.View on the source
In 2025, Don gives $25,000 cash outright to his son and a remainder interest worth $25,000 to his daughter, payable only after Don's retained life estate ends. He makes no other gifts. What is Don's total amount excludable under the 2025 annual exclusion?
What the exclusions leave behind meets the unified credit (the applicable credit). Lifetime taxable gifts and the death-time estate draw on one applicable exclusion amount: the basic exclusion amount, which was $13,990,000 for 2025 gifts, plus any DSUE amount where the predeceased spouse's executor made the portability election on a timely complete Form 706. The tentative tax is figured on the taxable gifts at rates reaching a 40% top rate, and the basic credit amount of $5,541,800 for 2025 offsets it. Small gifts therefore produce a computation with no payment: the credit absorbs the tentative tax and the exclusion carries forward reduced.
Dana made no prior gifts and holds no DSUE. Her 2025 taxable gifts total $40,000 after exclusions. The tentative gift tax is figured on the $40,000 and the unified credit absorbs it in full, so no payment is due. Her remaining applicable exclusion falls by the $40,000 of taxable gifts she used, which is exactly why the estate return later reconciles lifetime and death transfers together.
Form 709 Instructions Page 1
The basic credit amount for 2025 is $5,541,800. See Table of Basic Exclusion and Credit Amounts.View on the source
Form 709 Instructions Page 1
The applicable exclusion amount consists of the basic exclusion amount ($13,990,000 in 2025) and, in the case of a surviving spouse, any unused exclusion amount of the last deceased spouse (who died after December 31, 2010).View on the source
Form 709 Instructions Page 1
The top rate for gifts and generation-skipping transfers remains at 40%. See Table for Computing Gift Tax.View on the source
Form 709 Instructions Page 2
estate must have made an election on a timely and complete Form 706 to allow the donor to use the predeceased spouse’s unused exclusion amount.View on the source
Carl's 2025 taxable gifts, after exclusions and deductions, produce a tentative gift tax of $100,000. His available applicable credit for 2025 is $150,000, with no DSUE. Which of the following is correct?
The course asks you questions like these as you learn, brings back the ones you miss, and ends with full-length practice exams.
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