Do you file a gift tax return for a divorce settlement?

The rule in one paragraph

Under the Property Settlements heading, the publication starts with income tax: generally there is no recognized gain or loss on a transfer of property between spouses, or between former spouses when the transfer is incident to the divorce. It then flags the separate gift tax question. A transfer to a spouse who is a U.S. citizen is not subject to federal gift tax because of the unlimited marital deduction. A transfer to a former spouse is not generally eligible for the marital deduction and may be subject to federal gift tax unless one of the listed exceptions applies. If none applies, or one applies only in part, the transfer goes on a gift tax return.

The six exceptions

The publication lists them. First, a transfer in settlement of marital support rights is not taxed to the extent its value is not more than the value of those rights; this does not extend to settlement of dower, curtesy or other marital property rights. Second, a transfer to a spouse before a final decree qualifies for the marital deduction, except for certain terminable interests such as some trust interests, and transfers to a spouse who is not a U.S. citizen. Third, a transfer under the decree of a divorce court with power to prescribe a property settlement, including a settlement agreed on before the divorce if the decree made it part of the decree or approved it. Fourth, a transfer under a written agreement in settlement of marital rights or to provide a reasonable child support allowance, if you are divorced within the 3-year period that begins 1 year before and ends 2 years after the agreement date. Fifth, the annual exclusion. Sixth, direct payments of tuition to an educational organization or to a medical care provider, including a health insurer, which are not subject to gift tax.

The annual exclusion figure

The publication says the first $19,000 of gifts of present interests to each person during 2025 is not subject to gift tax. This covers a former spouse and a current spouse where the marital deduction does not apply. For a spouse who is not a U.S. citizen, the annual exclusion is $190,000, provided the gift would otherwise qualify for the marital deduction if the donee were a citizen. A present interest means the recipient has unrestricted rights to the immediate use, possession and enjoyment of the property or its income.

How and when to file

A transfer subject to gift tax is reported on Form 709, generally due April 15 following the year of the transfer. If a transfer would be taxable but for the written-agreement exception and you do not have a final decree by the due date, you must still report it on Form 709 and attach a copy of the written agreement. It is then treated as not subject to the gift tax until the final decree is granted, but no longer than 2 years after the agreement’s effective date. Within 60 days after you receive a final decree, send a certified copy to the IRS office where you filed Form 709. Related reading: the estate and gift tax calculator and the annual exclusion calculator.

Worked example

You sign a written settlement agreement in March and the divorce is final eight months later. You then transfer a $60,000 account to your former spouse under the agreement, but the decree neither incorporates nor approves it. Because the divorce is inside the window (eight months after the agreement), the written-agreement exception applies and no gift tax return is required on that ground. Now suppose the divorce is never finalised within 2 years and there is no decree or support-rights basis. Then only the $19,000 annual exclusion helps, so $41,000 is above it and would be reported on Form 709. Enter those numbers above to test them. This screen is a prompt, not a determination.

Other costs of divorce

The publication notes that legal fees and court costs for getting a divorce are not deductible, nor are fees for tax advice in connection with a divorce or fees to get alimony. Legal fees for a property settlement are not deductible but may be added to the basis of the property you receive. If you have no legal responsibility to pay your spouse’s legal fees and pay them anyway, the payments are gifts and may be subject to gift tax. On selling a main home, the publication points to Publication 523 for the $250,000 exclusion ($500,000 if filing jointly); see the home sale exclusion calculator.

Sources

• IRS Publication 504, Divorced or Separated Individuals (2025): Property Settlements, Gift Tax on Property Settlements (Exceptions), Gift Tax Return, and Sale of Jointly Owned Property. Read November 2, 2026.

Edition read: Publication 504 (2025), for use in preparing 2025 returns. Dollar limits and dates in this publication are for 2025; check the current publication and form instructions for your tax year. This page summarizes the publication and does not replace it.