If you made gifts in 2018 now is the time to begin thinking about filing a gift tax return. If you made gifts in 2018 in excess of the gift tax annual exclusion amount ($15,000 per donee in 2018, or $30,000 if a husband and wife elect to split gifts and a gift tax return is required to make this election), you must file a gift tax return and apply your lifetime gift tax exemption to report these gifts. For gifts made in 2018 each person has a gift tax exemption of $11,180,000, reduced by the value of any prior lifetime gifts. Any gifts made in excess of the lifetime gift tax exemption are taxable at a rate of 40%. A gift tax return to report gifts made in 2018 is due on April 15, 2019, and may be extended until October 15,2019.
If you made a gift to a trust that has the potential to distribute property to a grandchild or later descendant, it is important to file a gift tax return to have a clear record of the Generation-Skipping Transfer (GST) tax exemption allocated to the trust. If a person relies on automatic allocation of GST exemption instead of filing a gift tax return it can be confusing at a later date to determine if a trust is GST exempt, so filing a gift tax return to affirmatively allocate GST exemption is a better practice even if automatic allocation may apply.