Gifting shares may seem like a simple and generous act, but for US citizens, it carries important tax and reporting implications. Whether you’re gifting stock to a family member, friend, or a non-US person, it’s crucial to understand how US gift tax rules work and what IRS reporting may be required.
1. Are Gifts of Shares Taxable to the Donor?
Generally, gifts are not taxable to the person giving the gift. However, the donor may be subject to US gift tax rules if the value of the gifted shares exceeds the annual exclusion amount. For 2024, the annual exclusion is $18,000 per recipient. Married couples can combine their exclusions to gift up to $36,000 per recipient.
If your gift exceeds the annual exclusion, you won’t necessarily owe tax immediately—but you do have to file IRS Form 709 to report the gift. The excess amount reduces your lifetime gift and estate tax exemption, which is $13.61 million per individual in 2024 (adjusted annually for inflation).
2. What If You Gift Shares to a Non-US Person?
The rules are the same, but with additional considerations:
If you’re gifting shares in a US corporation, the gift is subject to US gift tax rules. If you gift shares in a foreign corporation, the gift may not be subject to US gift tax, but still needs to be reported in some cases. Gifting to a non-US spouse is not covered by the unlimited marital deduction. Instead, a much lower special annual exclusion applies: $185,000 in 2024.
3. Are Gifts Taxable to the Recipient?
In the US, gifts are not taxable income to the recipient. However, the cost basis and holding period of the shares carry over from the donor to the recipient. This becomes relevant when the recipient sells the shares in the future, as it will determine the capital gain.
4. Reporting Requirements
Form 709: Must be filed by the donor if the gift exceeds the annual exclusion or if the gift is to a non-citizen spouse. Form 8938 / FBAR: If the gifted shares are held in a foreign account or are shares of a foreign company, you may also need to report them under FATCA or FBAR rules.
5. Planning Tips
Time your gifts across tax years to stay within the annual exclusion. Gift appreciated stock to family members in lower tax brackets if capital gains are a concern (but watch for kiddie tax rules if gifting to children). Consider whether the recipient will be in the US or abroad, as this can affect both compliance and strategy.
Final Thoughts
Gifting shares as a US citizen can be a valuable estate and tax planning strategy, but it requires careful attention to IRS thresholds and international considerations. Filing obligations such as Form 709 or FATCA-related disclosures should not be overlooked.
The information in this blog post is for general informational purposes only and does not constitute professional tax advice. We strongly recommend consulting a qualified tax professional before making any decisions. US Expat Tax Advisor is not liable for any actions taken based on this content.
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