Reporting in the US

If you are a citizen or resident of the United States, you must file a gift tax return (whether or not any tax is ultimately due) if you gave gifts to someone in the year totaling more than $13,000. You must do this by filing Form 709.

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Tax planning

There are 3 circumstances under which you do not have to file Form 709. If you make gifts to political organizations, if you make payments directly to educational institutes on behalf of a student or if you make payments directly to health care providers on behalf of someone who received medical treatment under them. These 3 payments are not considered as gifts.

"For those looking to pass on gifts to the next generation, using the educational exclusion can be a good tax planning tool," advises Vinay Navani, CPA and director of tax at New Jersey based firm Wilkin & Guttenplan, P.C., as quoted by TOI.

"There is no explicit requirement that the educational institution be based in the US, just that it would qualify for tax exempt status in the US, not necessarily that it has US tax exempt status. In short, as long as the educational institution is acting like a US tax exempt educational institution, it should qualify," he adds.

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