Q: gift tax for green card holder spouse that exceeds annual exclusion
I understand that gifts (real estate) to a green card holding spouse must file a form 709. My question: if the gift FMV is above the current annual exclusion will that gift become partially taxable? For sake of question let's assume there are no other gifts in lifetime and this particular gift amount is below lifetime exemption amount.
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A:
When you gift real estate to a green card-holding spouse and the gift exceeds the annual exclusion amount, you need to file IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. However, filing Form 709 does not mean that you immediately owe taxes on the gift. Instead, it helps the IRS keep track of how much of your lifetime gift and estate tax exemption you've used.
If the fair market value (FMV) of the gift exceeds the annual exclusion, the excess amount is applied against your lifetime exemption amount. As long as the total value of all your lifetime gifts remains below the lifetime exemption (currently several million dollars), there would be no gift tax owed. This means that even if the gift exceeds the annual exclusion, it is not necessarily taxable at this time.
It’s important to keep records of the gift and file the required forms properly, as future gifts could potentially push you over the lifetime exemption threshold. At that point, any excess would become subject to gift tax. Managing these thresholds carefully can help you avoid unexpected tax liabilities.
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