Form 709: U.S. Gift Tax Return for Expats

If you’ve given someone cash or property valuing over $17,000 this year, you probably need to file IRS Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return. Form 709 can be confusing—especially for American expats. Who has to file, annual thresholds, and what happens when the gift is to or from a foreign entity are common question expats ask our Tax Advisors, and you can find the answers below.

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Who files Form 709?

If you’re a U.S. citizen, you are required to file IRS Form 709 if you’ve given away more than $17,000 worth of property or cash to a single person in the last tax year. That amount, known as your annual exclusion, resets each year—you could theoretically give $16,999 dollars to your best friend every year for the rest of your life and not ever have to file this form.

However, as soon as you give over $17,000 (in cash or property) to one single person in a year, the difference will be deducted from your lifetime estate tax exemption of $12.92 million. Once you go over that lifetime threshold of $12.92 million, you’ll have to start paying taxes on the things you give away.

There are a few exceptions—if you give money to the following people/institutions, you might not have to pay gift taxes:

• A care provider for the purpose of someone else’s medical expenses
• Tuition paid to an educational institution
• Your spouse (if your spouse is a U.S. citizen)

It doesn’t matter if the gift is to a U.S. person or a foreign person, or if the gift/property is in the U.S. or overseas. If the value of those gifts to any one person exceeds $17,000, you need to file a Gift Tax Return.

Here are a few tax Form 709 examples:

• Sue, a U.S. citizen, is moving from Illinois to London for a new job. Before she goes, she gifts her car, worth $19,000, to her nephew, as she won’t need it anymore. Since the car is worth more than $17,000 Sue is required to file Form 709, but she’s not required to pay any taxes on it. The only effect is that her lifetime estate tax buffer is now $2,000 lower—the difference between the value of the car and the annual exclusion.
• Dave, an American expat in Korea, gives $5,000 as a wedding gift to a Korean friend. That same year, he gives his condo in San Diego—worth $350,000—to his brother. Because the gift to his Korean friend is under $17,000, Dave does not have to pay taxes on it. He does have to file Form 709 for the condo he gifted, and he has reduced his lifetime exclusion amount.
• Bill Gates gives everyone in the U.S. $5,000. Because he didn’t give any single person more than $17,000, he wouldn’t have to file the gift tax return.

If you’re unsure about your specific situation, it may be best to file with a Tax Advisor and let them do the paperwork for you.

Why the Gift (and Generation-Skipping Transfer) Tax Return exists

Some expats mistakenly think the Gift Tax Return exists to collect taxes on gifts you’ve given or received.

You’ll be happy to hear that no; you are not required to pay taxes on gifts you’ve given—unless you’ve been very generous. The gift tax return exists to keep U.S. citizens accountable for their annual excludable amount of $17,000 and lifetime gift and estate tax exemption of $12.92 million. For the same reason, if you receive more than $100,000 in gifts from a foreign person in a year, you’d then also have to file Form 3520.

About that generation-skipping part…

IRS form 709 is also used to report gifts either given to grandchildren or great-grandchildren as well as gifts to be placed in trust for future generations. These types of gifts are subject to the generation-skipping transfer tax. Gift tax only applies to the amount of the gift that was above the annual exclusion for that tax year.

Form 709 vs Form 706

What’s the difference between Form 706 and Form 709? Form 706 is filed by the executor of an estate on behalf of a deceased person to calculate estate tax owed, while the latter is filed by you to report gifts exceeding the annual exclusion.

Form 709 due date and instructions

What is Form 709’s due date? You need to file it sometime after January 1 and by the U.S. tax due date of the year after the gift was made. You can see up-to-date tax deadlines on our Expat Tax Deadline page. So, if you gave your grandson $20,000 in July of 2023, you’d have to file your gift tax return sometime between January 1 and the 2024 tax deadline. You can also file for an extension.

What happens if you’re supposed to but don’t file a gift tax return, or you just plain forget to? Well, the same thing that can happen if you forget to report any of your financial assets—you may get penalized. In this case, you may be penalized up to 100% of the tax amount.

As Form 709 instructions can be confusing, it’s best to leave it to a seasoned tax professional.

Confused about your U.S. Gift Tax Return and Filing Form 709? Trust the experts at H&R Block

Unsure about the gift tax and whether it applies to your situation? Our experts are here to guide you every step of the way. Get started with virtual Expat Tax Preparation from H&R Block today.