Level 1

Gift Tax

Situation: My mother is giving me $50,000 for a down payment on a house. She's making a bank transfer into my savings account. She lives in Illinois and I live in Minnesota. I know this passes the annual federal gift tax limit of $15,000, but it does not pass the lifetime exclusion limit of $11.4 million. Minnesota does not have a gift tax. Illinois has the gift tax rolled into the estate tax with a lifetime exclusion of $4 million. 

 

My understanding: As the receiver, I do not have to pay any tax. As the giver, my mother will have to file a Federal Form 709 for the year she made the gift (i.e., gift given in 2020, file in 2021 for tax year 2020). She will not have to pay any tax because that amount, though over the yearly limit, is not over the lifetime exclusion. Her lifetime exclusion limit will be reduced by $35,000 ($50,000 minus the $15,000 yearly exclusion). For Illinois taxes, her lifetime estate tax exclusion will also be reduced by $35,000. 

 

Questions:

1. Is my understanding correct?

2. Will my mother have to file Form 709 every year after the first time filing it, or only during years she gives more than the exclusion?