Gifts & Gift Taxes

Making gifts, whether to a family member or a charity, is a great strategy for shifting income to other family members. Gifts can be made in cash, by check, as appreciated securities (stocks, bonds or mutual funds), or as property (real estate, motor vehicles).

When the person making the gift (the “donor”) makes a gift, the value of the gift is the fair market value (FMV) of the property given on the date the gift is made (the “valuation date”). For gifts of cash or a check, the FMV is the value of the cash or check when gifted. For gifts of securities (i.e., bonds, mutual funds or stocks), the FMV is the mean between the quoted closing selling price on the valuation date and the closing selling price on the trading day before the valuation date. For gifts of real property (i.e., a house on a piece of land) where valuations are difficult to determine, the FMV is determined using the comparable sales method, taking into consideration differences in the date of sale, and size, condition and location of the properties being compared, and making all appropriate adjustments.

IRS regulations stipulate that the donor (not the recipient) must report their gifts on Form 709 only if their gift is greater than the annual gift tax exclusion amount:

For example, in 2025, each individual may give up to $19,000 to another individual each year, without incurring any gift tax liability. A married couple may give up to $38,000 to an individual (a split gift of $19,000 each). A married couple may give up to $76,000 to another married couple (a split gift of $19,000 each, to each spouse). There is no limit to the number of individuals who may receive gifts of up to $19,000 each year.

Any gifts made over the annual exclusion amount must be reported on Form 709 by the donor (not the recipient), and are subject to the gift tax, which can range from 18% to 40%. Married couples may not file a joint Form 709 gift tax return. Each spouse is responsible for filing his or her own Form 709 return.