Login | April 20, 2026
Gift Tax Returns and 529s
Julie Jason
Published: April 16, 2026
That's the big difference between income taxes and gift taxes. The recipient is not subject to gift taxes; the donor is. Nor is the gift taxable to the recipient as "income."
When Congress proposed gift taxes in the 1920s, the idea was to prevent people from depleting their estates -- and avoiding estate taxes -- by giving away money during their lifetimes.
That brings up the second oddity with gift taxes. It's rare that people actually have to pay a gift tax. The reason is simple: There is a very high lifetime gift exemption of $15 million, which is identical to the estate tax lifetime exemption amount (2026). The obligation to pay a gift tax isn't triggered until the lifetime exemption amount is exceeded.
That means that very few people, fewer than 1% of the U.S. population, will be paying a gift tax. However, many more will be filing gift tax returns.
A donor must file a gift tax return if the gift in any particular year is above the annual "exclusion amount," which is $19,000 for 2026.
The annual exclusion attaches to a single donee -- the person receiving the gift. If a donor gives five $19,000 gifts (total $95,000) to five different people, there is no gift tax obligation and no need to file a gift tax return.
However, if you "superfund" a 529 for your son Freddie, a single donee, by making one gift of $95,000 (five times $19,000) in 2026, you do need to file a gift tax return. If you elect five-year averaging on the gift tax return, the $95,000 gift made in 2026 is treated as five annual $19,000 gifts to Freddie from 2026 to 2030.
To read more about 529 superfunding, see Fidelity's article "Making the most of your 529 plan" (tinyurl.com/3ffyj5jx) and Saving for College's article "Do You Have to Pay Gift Taxes on 529 Contributions" (tinyurl.com/39z7ez34).
Before we leave this topic, here is another nuance. You might think that filing a gift tax return is a waste of time if you feel your assets will never reach the lifetime exemption amount. Not so fast. You should file even if you won't owe the gift tax in order to create a paper trail and be technically compliant. Plus, at some point in the future, who knows?
What happens if you don't file a gift tax return when you should (IRS Form 709 -- tinyurl.com/y539y3kc), that is, when you exceed the $19,000 annual exclusion threshold?
Under Section 6501(c)(3) of the U.S. Tax Code, if no tax return is filed, "the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time" (tinyurl.com/n488xa7t). In other words, there is no statute of limitations -- penalties for failure to file can start to accrue to when the gift was made even if decades have passed. In comparison, a three-year statute of limitations applies to filed returns.
Clearly, families whose estates are large enough to trigger an estate tax need to dutifully file their gift tax returns when making gifts above the annual exclusion amounts. The failure to file may come up when the donor's estate is being settled, and if interest and penalties are due, they will be assessed to the date of the gift tax return due date.
Should others file? There is no minimum gift amount that triggers the gift tax filing requirement. Perhaps there should be. A possible $1 million minimum was discussed by the authors of "Rethinking the Penalty for the Failure to File Gift Tax Returns" (tinyurl.com/6f6hawm9).
One final point. If you're thinking about doing your own 709 gift tax filing, I'm not sure that's a good idea. The return seems deceptively simple, but there is more to the picture than meets the eye. Have your tax adviser or trust and estates lawyer take charge, advises Bill Wilson, CPA, Van Brunt, Dubiago & Company, a division of Bedard McClanahan CPAs, P.C.
Seasoned investment counsel (tinyurl.com/52nus8hz) and award-winning columnist and author, Julie Jason, JD, LLM, promotes financial literacy and investor protection. Read her latest book, "The Discerning Investor: Personal Portfolio Management in Retirement for Lawyers (and Their Clients)" (tinyurl.com/4u7h9pjs), published by the American Bar Association. Write to Julie at readers@juliejason.com. While all questions cannot be answered, each email is read and reviewed and can lead to discussion in a future column.
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