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U.S. Internal Revenue Service building in Washington, D.C. May 14, 2013. Photo by Diego M. Radzinschi/ALM

Financial Planning > Trusts and Estates > Estate Planning

Taxpayers' Gift Tax Bill Rose to $2.8 Billion in 2021

By Allison Bell

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U.S. taxpayers reported owing a total of $2.8 billion in gift taxes and generation-skipping transfer (GST) on returns filed in 2021, up from $409 million the year before, according to new data from the Internal Revenue Service.

The number of returns showing taxpayers owed gift or GST taxes increased to 1,820, from 528 in 2020, and the total of returns showing gift or GST obligations of $1 million or more rose to 1,101, from 266.

In 2019, 1,016 returns showed $1.3 billion in gift and GST obligations, with 496 taxpayers owing more than $1 million.

IRS officials suggested in a data summary that one reason for the increase in 2021 gift and GST tax obligations could be taxpayers’ efforts to use the temporary gift, estate and GST tax exemption changes included in the Tax Cuts and Jobs Act of 2017. The TCJA provision, which increased the lifetime exemption for individuals to $11.58 million in 2020 from $5.49 million in 2017, is set to expire in 2026.

What It Means

More high-net-worth clients are thinking about gift and GST taxes.

The Background

Taxpayers report gift and GST taxes to the IRS on Form 709.

The rules are different for spouses who are U.S. citizens, spouses who are U.S. citizens and other gift recipients. For spouses who are not U.S. citizens, for example, the annual exclusion is $164,000.

The top marginal tax rate for gifts is 40%.

More 2021 Data

In 2021, 250,949 donors filed Form 709 returns. They reported giving $183 billion in gifts.

Only 3.8% of the gifts went to charities or charitable trusts; 81% went to relatives of the donors.

Donors provided $86 billion through direct gifts and $96 billion through trusts.

The IRS building in Washington. Credit: Diego M. Radzinschi/ALM

Allison Bell

Think_Allison

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