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 Massachusetts, as in all states, the federal gift tax is governed by federal law, not state law. The federal gift tax applies to transfers of property by gift from one individual to another when the donor does not receive full value in return. This includes money, real estate, and other types of property. If an individual sells something for less than its fair market value or extends a loan without interest or at a below-market interest rate, it may also be considered a gift for tax purposes. 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 above this amount must be reported on IRS Form 709, and the donor may have to pay gift tax or apply the amount against their lifetime estate and gift tax exemption. It's important to consult with an attorney or tax advisor for specific advice related to gift tax implications.