Most gifts are not subject to the gift tax. There is usually no tax when:

–you give a gift to your spouse
–you give a gift to a political organization for its use
–you give a gift to a qualified charity
–your gift to anyone besides your spouse or dependent does not exceed the annual exclusion
–you’ve paid tuition or medical expenses directly to an educational institution or medical facility for anyone that you don’t claim as a dependent on your tax return

(If you pay tuition or medical expenses for yourself, a spouse, or a dependent, you may be able to take these expenses as deductions on your tax return.)

If you give a gift to someone who is not your spouse or dependent, the gift tax typically does not apply until the value of the gift exceeds the annual exclusion for the year. The Annual Exclusion for 2016 is $14,000.

The gift tax may also apply if you forgive a debt or give a loan that is interest-free or below the market interest rate. Gifts are not deductible unless they are made to a qualified charity.

Generally, the person who receives your gift will not have to pay taxes on it. The person who gives a gift over the exclusion amount should file a gift tax return.

Taxpayers and their spouse can give a gift up to $28,000 to a third party without making it a taxable gift.

Taxpayers must file Form 709 when:

1. A gift was given to at least one person (other than your spouse or dependent) in excess of the annual exclusion for the year.

2. Spouses are splitting a gift. This is true even if half of the split gift is less than the annual exclusion. (See #12 on Form 709).

3. A gift of a future interest that the recipient can’t actually possess, enjoy, or from which they’ll receive income later was given to someone other than your spouse.

4. A spouse is given an interest in property that will terminate due to a future event. (This is called a qualified terminable interest property (QTIP) trust and is a type of trust that enables someone to provide for a surviving spouse, and also to maintain control of how the trust’s assets are distributed once the surviving spouse dies.)