Received money from family I want to include on lifetime inheritance exemption

Question

I got a check from my mother this year ($65K) that I want to deduct from my lifetime inheritance limit. (I'll never exceed the non-tax limit) I understand there is an IRS form for that to include with a tax return. Will the standard FreeTaxUSA software handle that for me? Also, I file my state taxes for SC with you, is there anything I should for the state return, and will your software handle that if so? Thanks in advance for your advice.

LeahB · Answer

Hi flyingwrench34, thank you for your question! Like user cdkirchn22 mentioned, this is not something you would generally need to report as the recipient of the gift. It is usually left to the gifter to file Form 709 if required. Since this is not something you would need to account for in the software, no special steps would be needed on your state return.

As an added note, FreeTaxUSA does not prepare Form 709 as this is a different kind of tax return. If an individual did need to file this form, this would be done independently from the personal return and has its own deadlines with the IRS.

Reference page 5:  Instructions for Form 709 United States Gift (and Generation-Skipping Transfer) Tax Return

cdkirchn22 · Answer

As the recipient of the gift, you don't pay taxes and you don't need to deduct anything from your lifetime inheritance limit.  Your mother would potentially likely need to fill out IRS Form 709 as the gift is over the annual exemption limit.  However, if she's married, she and her husband can each gift you $18,000 this year and if you're married and/or have children, she can split the gift on the form so it won't reduce her lifetime inheritance limit.