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 to all individuals in the United States, including those residing in Alabama (AL). It is imposed on the transfer of property by one person (the donor) to another (the donee) without adequate consideration in return. This tax is relevant regardless of the donor's intent and covers all types of property, including money, real estate, and personal items. When a donor provides a gift, sells something for less than its fair market value, or extends a loan without interest or at a below-market interest rate, it may be considered a gift for tax purposes. The donor is typically responsible for paying the gift tax and must file IRS Form 709 if any gifts exceed the annual exclusion limit. The annual exclusion allows a person to give a certain amount to as many individuals as they wish each year without incurring a gift tax. For 2023, the annual exclusion is $17,000 per recipient. Gifts above this amount may require the filing of Form 709 and could potentially tap into the lifetime gift and estate tax exemption. It's important to consult with an attorney or tax advisor for personalized advice, as state laws can also affect estate planning and gift giving.