US gift tax lifetime exclusion: does it only apply to gifts for much younger recipients?

Wait, so does this mean I can give my brother (who's only 3 years younger than me) a large gift without worrying about the gift tax as long as it's under that lifetime limit? And what happens if I exceed the annual exclusion amount? Do I have to file something?

Yes, you can give your brother gifts of any amount without paying gift tax as long as you stay under your lifetime exemption limit. The relationship or age difference doesn't matter at all for the basic gift tax rules. If you give someone more than the annual exclusion amount ($17,000 per person for 2023), you don't pay tax on it right away, but you do need to file Form 709 (Gift Tax Return). The amount over $17,000 counts against your lifetime exemption. You only start paying actual gift tax when your cumulative lifetime gifts exceed the $12.92 million threshold.

Does it actually answer specific questions about your situation or just explain the documents? I've got a somewhat unusual situation with gifts to my niece who lives abroad, and I'm wondering if it would help with that.

I'm skeptical about these AI tools for tax advice. How does it compare to just talking to a CPA? I'm always worried about getting incorrect information from automated systems, especially with something as serious as tax planning.

It answers specific questions based on the tax documents you upload. It's particularly good at explaining how general rules apply to specific scenarios, so it could definitely help with your international gift situation. You can ask follow-up questions about your specific circumstances. For tax planning, I actually think it complements talking to a CPA rather than replacing them. I used it to understand the basics and terminology first, which made my meeting with my accountant much more productive since I already understood the fundamentals. The information comes directly from IRS documents, so it's reliable for explaining official rules.

How long did it actually take to get through? I've literally spent hours on hold with the IRS before just giving up. Did you have to provide them with any personal information to use the service?

This sounds too good to be true. The IRS is notoriously impossible to reach, especially these days. Did they actually provide useful info once you got through? Most times I've called government agencies, the people who answer can only give very general information.

I got through in about 85 minutes, but the difference was I didn't have to actively wait on hold - they called me when an agent was ready. You only need to provide your phone number so they can call you back, nothing else sensitive. The agent I spoke with was actually quite knowledgeable about gift tax rules. They walked me through exactly how to report gifts exceeding the annual exclusion on Form 709 and explained how the lifetime exemption tracking works. They also clarified that the lifetime exemption doesn't have age restrictions - it's the generation-skipping transfer tax that deals with age differences, which was really helpful for my situation.

Do you know what happens if you don't file the 709 form? Are there penalties? I gave my sister about $30k last year for medical bills and had no idea I needed to file anything since I'm nowhere near that lifetime limit.

There can definitely be penalties for not filing Form 709 when required, even if no tax is due. The standard penalty is 5% of the tax owed per month, up to 25%. But since you likely don't owe any actual tax (just needed to file the form), the penalty might be minimal or potentially zero if you can show reasonable cause. For your specific situation with your sister, you might actually qualify for a medical expense exception. Payments made directly to medical providers on someone else's behalf are exempt from gift tax and don't require filing. But if you gave the money directly to your sister who then paid the bills, that's technically a reportable gift. I'd recommend speaking with a tax professional about filing a late 709 to get compliant.

Thank you for this clear breakdown! I was definitely mixing up the different concepts. So if I understand correctly, I can give gifts to anyone (younger, older, same age) and use my lifetime exemption, but there are extra rules if the person is much younger than me (like grandchildren)?

Exactly right! Your lifetime gift tax exemption ($12.92 million in 2023) applies to all taxable gifts regardless of the recipient's age. You can give to your spouse, sibling, friend, or anyone else and it works the same way for basic gift tax purposes. The generation-skipping transfer (GST) tax is an additional layer that only applies to gifts to people who are at least 37.5 years younger than you (or in a defined generational category like grandchildren). These transfers are potentially subject to both regular gift tax and GST tax, but there's a separate GST exemption amount (currently also $12.92 million) to offset this additional tax. This was designed to prevent wealthy families from skipping tax by bypassing a generation.