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.

The federal gift tax is applicable across all states, including Virginia (VA), and is governed by federal law, not state statutes. It is imposed on the transfer of property by one individual to another without adequate consideration in return. The tax is required when the value of the gift exceeds the annual exclusion limit set by the IRS, which is $16,000 per recipient for 2023. If the value of the gift is above this threshold, the donor is typically responsible for paying the tax. However, there is also a lifetime exemption amount that allows individuals to give away a certain total amount over their lifetime without incurring the gift tax. For 2023, the lifetime exemption is $12.92 million. It's important to note that certain gifts are exempt from the tax, such as those to a spouse, gifts to charities, and payments made directly to educational or medical institutions for someone else's benefit. To report any taxable gifts, IRS Form 709 must be filed. It's advisable for individuals in VA considering making significant gifts to consult with an attorney or tax advisor to understand the implications of the federal gift tax.