The federal gift tax is a tax on the transfer of property from one individual (the donor) to another (the donee) when the donor receives nothing—or less than full value—in return. The tax applies whether the donor intends the transfer to be a gift or not.

The gift tax applies to the transfer of a gift of any type of property. You make a gift if you give property (including money) or the use of or income from property without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

For additional information, see Internal Revenue Service (IRS) Form 709 and its instructions.

In New Jersey, as in all states, the federal gift tax applies to transfers of property where the donor does not receive full value in return. This tax is governed by federal law, not state law, and it encompasses any type of property, including money, real estate, or other assets. When a person gives a gift, sells something for less than its full value, or extends a loan without interest or at a reduced interest rate, it may be considered a gift for tax purposes. The donor is typically responsible for paying the gift tax. Each individual has an annual gift tax exclusion amount ($16,000 for 2023), below which gifts do not need to be reported and are not subject to tax. Gifts exceeding this amount must be reported on IRS Form 709, and any gift tax due is paid by the donor. It's important to note that New Jersey does not impose a state-level gift tax, so only the federal regulations apply.