The federal gift tax threshold for 2024

You do not owe federal gift tax on most gifts you give during your lifetime. The IRS allows you to give away a certain amount each year without triggering any tax or paperwork. For 2024, that amount is $18,000 per person per year. If you are married and both spouses agree, you can give $36,000 to the same person without filing a gift tax return.

These yearly limits reset on January 1 each year. If you give $18,000 to your adult child in December 2024, you start fresh with a new $18,000 allowance on January 1, 2025. The limits change most years because they are tied to inflation and rounded to the nearest $1,000.

There is also a separate lifetime limit called the lifetime gift and estate tax exemption. For 2024, you can give away $13.61 million total during your lifetime and at death before owing any federal tax on the amount above that. This exemption is per person, so a married couple can give away $27.22 million combined. These numbers also change yearly with inflation.

Key Takeaways

  • You can give $18,000 per person per year in 2024 without filing a gift tax return or owing any tax.
  • Married couples can combine their gifts and give $36,000 to one person each year without triggering tax.
  • Gifts to spouses with U.S. citizenship, direct payments for someone's medical bills or tuition, and gifts to political organizations are never taxed no matter the amount.
  • If you give more than $18,000 to one person in a year, you file Form 709 with the IRS, but you still owe no tax unless you exceed your lifetime exemption of $13.61 million.
  • The yearly limit and lifetime exemption both increase most years with inflation, so the amounts change from year to year.

Gifts that do not count toward the limit

Certain gifts are never taxed and never count against your yearly or lifetime limits, no matter how much you give. Gifts to your spouse (if your spouse is a U.S. citizen) have no limit. You can give your spouse $1 million or $10 million and owe no tax.

Direct payments for someone else's medical care or school tuition also do not count. If you pay your grandchild's college tuition directly to the university, that payment is not a taxable gift, even if it is $100,000. The same rule applies if you pay a hospital bill directly. The key is that you pay the provider, not the person receiving care.

Gifts to political organizations, charities, and other tax-exempt organizations are never taxed. Gifts to U.S. citizens who are not your spouse are also unlimited if you give them to a may have access to charity on their behalf.

What happens if you give more than $18,000 in one year

If you give one person more than $18,000 in a single calendar year, you must file Form 709 (the United States Gift Tax Return) with the IRS. You file it with your regular tax return by April 15 of the following year. Filing this form does not mean you owe tax — it means you are reporting the gift and using part of your lifetime exemption.

For example, if you give your daughter $25,000 in 2024, you file Form 709 to report the $7,000 that exceeds the yearly limit. That $7,000 counts against your $13.61 million lifetime exemption, but you owe no tax on it. You only owe tax if the total of all gifts you have made during your lifetime (above the yearly limits) exceeds $13.61 million.

If you are married and your spouse agrees, you can split the gift on the form. If you and your spouse together give $36,000 to your daughter, you can report it as if each of you gave $18,000, and neither of you files a return.

The lifetime exemption and when it matters

The lifetime exemption is the total amount you can give away above the yearly limits before owing any federal tax. In 2024, that amount is $13.61 million per person. Most people never reach this limit because it is very high.

The exemption applies to gifts you make during your lifetime and to your estate when you die. If you give away $5 million above the yearly limits during your lifetime, your estate exemption is reduced by $5 million. When you die, your estate can only use the remaining $8.61 million exemption.

If your total gifts and estate exceed $13.61 million, the IRS taxes the amount above that at a rate of 40 percent. This is a federal tax only — your state may have its own gift or estate tax with different rules.

State gift taxes and other rules

Most states do not have a gift tax. However, a few states tax gifts during your lifetime or at death. Iowa, Kentucky, Maryland, New Jersey, and Pennsylvania have inheritance taxes that explore to gifts and bequests to certain relatives. The rules and rates vary by state and by your relationship to the person receiving the gift.

If you live in one of these states or give property located in one of these states, you may owe state tax even if you do not owe federal tax. You should check your state's tax agency website or speak with a tax professional to understand your state's rules.

Some gifts are also subject to other rules. If you give someone a loan, the IRS may treat it as a gift if you do not charge interest at the federal rate. If you give away a business or investment property, you may have capital gains tax consequences separate from gift tax.

How to report gifts on your taxes

If all your gifts in a year are $18,000 or less per person, you do not file any form or report them to the IRS. You straightforward keep records of what you gave in case the IRS asks later.

If you give more than $18,000 to one person in a year, file Form 709 with your tax return. You can file it electronically through tax software or by mail. The form asks for the date of the gift, the recipient's name and address, a description of what you gave, and the value of the gift.

If you are not sure whether a gift counts or what value to report, a tax professional or CPA can help you. They can also advise you on whether splitting gifts with your spouse makes sense for your situation.

Frequently Asked Questions

Do I owe tax if I give my child $20,000?

You do not owe tax, but you must file Form 709 to report the $2,000 that exceeds the yearly limit. That $2,000 counts against your lifetime exemption of $13.61 million, but you pay no tax unless your lifetime gifts exceed that exemption.

What if I give money to my grandchild's 529 college savings plan?

Contributions to a 529 plan count as gifts and are subject to the yearly limit. However, you can make a special election to treat a contribution as if it were made over five years, which lets you give up to $90,000 per person in one year without filing a return.

Does my spouse's gift count toward my limit?

No, each person has their own yearly limit. Your spouse's $18,000 gift does not reduce your $18,000 allowance. You can combine your limits only if you both agree to split a single gift on Form 709.

What if I give a gift and then the person gives it back to me?

A gift that is returned is not considered a gift for tax purposes. However, if the return happens long after the original gift, the IRS may question whether it was truly a gift. Keep records showing when the gift was made and when it was returned.

Do I have to report gifts of cash?

Cash gifts are treated the same as any other gift. If you give $18,000 or less to one person in a year, you do not report it. If you give more, you file Form 709. The IRS does not require you to report the source of cash you receive as a gift, but your bank may report large cash deposits under separate rules.