Does the recipient's marital status affect how a monetary gift is counted for gift tax reporting?
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Yes, the recipient's marital status—specifically, whether the recipient is the spouse of the donor—significantly affects how a monetary gift is treated for federal gift tax reporting under the Internal Revenue Code.
1. Gifts to a Spouse Who Is a U.S. Citizen
Unlimited Marital Deduction:Under IRC §2523(a), when a donor makes a gift to their spouse who is a U.S. citizen, the value of the gift is generally deductible in full for gift tax purposes. This means that such gifts are not counted as taxable gifts and do not need to be reported as taxable on the donor’s gift tax return, regardless of the amount, provided the gift meets the requirements of §2523 (e.g., it is not a terminable interest unless it qualifies as a qualified terminable interest property (QTIP) or meets other exceptions).
Exceptions:- If the gift is a terminable interest (e.g., a life estate or interest that ends upon a certain event), the deduction may be disallowed unless it meets specific exceptions under §2523(b), (e), or (f).- The unlimited marital deduction does not apply if the recipient spouse is not a U.S. citizen (see below).
2. Gifts to a Spouse Who Is Not a U.S. Citizen
Annual Exclusion for Non-Citizen Spouse:If the recipient spouse is not a U.S. citizen, the unlimited marital deduction does not apply. Instead, IRC §2523(i)(2) provides a special annual exclusion amount for gifts to a non-citizen spouse. For 2025, this exclusion is $190,000 (adjusted annually for inflation). Gifts to a non-citizen spouse in excess of this amount are subject to gift tax and must be reported.
3. Gifts to Non-Spouses
Annual Exclusion:For gifts to any individual who is not the donor’s spouse, the annual exclusion under IRC §2503(b) applies. For 2025, the annual exclusion is $19,000 per recipient. Gifts above this amount to any one individual in a calendar year are considered taxable gifts and must be reported on Form 709.
4. Gift Splitting Between Spouses
Gift Splitting Election:If a married couple (both U.S. citizens or residents) makes a gift to a third party, they may elect under IRC §2513 to treat the gift as made one-half by each spouse. This allows them to effectively double the annual exclusion for gifts to third parties, but both spouses must consent to the election.
5. Summary Table
6. Legal Nuance
- The marital deduction is only available if the recipient is legally recognized as the donor’s spouse at the time of the gift.
- For non-citizen spouses, the higher annual exclusion is intended to prevent large transfers to non-citizen spouses from escaping U.S. transfer tax jurisdiction.
- The annual exclusion under §2503(b) does not apply to gifts of future interests.
- Special rules apply for gifts in trust, gifts of terminable interests, and for split gifts.
7. Conclusion:
The recipient’s marital status—and citizenship—directly affects the amount of a monetary gift that is excluded from gift tax, the availability of the marital deduction, and the reporting requirements for the donor.
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