The federal gift tax applies only to gifts above a yearly threshold, and most people never hit it

The federal gift tax is a tax on the person who gives a gift, not the person who receives it. The IRS lets you give away a certain amount each year without filing any paperwork or owing tax. For 2024, that amount is $18,000 per person per year. If you give more than that to one person in a single year, you do not automatically owe tax — instead, you file a form called the Form 709 (Gift Tax Return) to report it. The tax itself only kicks in after you have given away a total of $13.61 million in your lifetime (as of 2024; this number changes yearly).

Most people never file Form 709 and never pay gift tax because they stay under the yearly limit. The yearly limit resets on January 1 each year, so you can give $18,000 to one person in December and another $18,000 to the same person in January without triggering anything. If you are married, you and your spouse can each give $18,000 to the same person in the same year, which means $36,000 total from both of you.

Key Takeaways

  • You can give up to $18,000 per person per year (in 2024) without filing any tax form or owing any tax.
  • If you give more than $18,000 to one person in one year, you file Form 709 but still owe no tax unless your lifetime gifts exceed $13.61 million.
  • Married couples can combine their limits, allowing $36,000 per person per year when both spouses give.
  • Certain gifts are never taxed: tuition paid directly to a school, medical expenses paid directly to a provider, gifts to your spouse, and gifts to charities.
  • The yearly limit and lifetime limit both increase most years; check the IRS website for the current year's numbers before you give large amounts.

Gifts that do not count against your limit

Some gifts are completely exempt from gift tax rules, no matter how much you give. If you pay someone's tuition directly to the school or university, that payment does not count as a gift and does not use up any of your $18,000 yearly limit. The same rule applies to medical expenses: if you pay a hospital or doctor directly for someone else's care, that payment is not a taxable gift.

Gifts to your spouse are never taxed, even if you give them millions of dollars in a single year. Gifts to charities registered with the IRS also do not count. If you give money to a political campaign, that is treated as a contribution, not a gift, and follows different rules. Gifts to non-citizens who are not your spouse do have a lower yearly limit ($18,000 in 2024 for citizens, but only $37,000 for non-citizen spouses), so check the IRS rules if that applies to you.

When you need to file Form 709

You file Form 709 if you give more than $18,000 to any single person in a calendar year. You do not owe tax just by filing the form — you are straightforward reporting the gift to the IRS. The form goes on your tax return for that year, filed by April 15 of the following year (or October 15 if you file an extension).

Filing Form 709 does use up part of your lifetime exemption. If you give $25,000 to your child in 2024, you file Form 709 to report the $7,000 overage. That $7,000 counts against your $13.61 million lifetime limit. You still owe no tax that year, but when you die, your estate will have $7,000 less room before estate tax applies. For most people, this is not a practical concern because the lifetime limit is so high.

Splitting gifts between spouses

If you are married, you and your spouse can treat a gift as if you both gave it, even if only one of you actually gave the money. This is called gift splitting. It doubles your yearly limit for that gift. If you give $36,000 to your child from your bank account, you and your spouse can file Form 709 together and report it as a $18,000 gift from each of you. Neither of you owes tax, and neither of you uses up any lifetime exemption.

Gift splitting requires both spouses to agree and to file Form 709 together (or both file separate returns that both indicate splitting). You cannot split a gift after the year is over, so you need to plan this before December 31 if you want to use it for that year's gifts.

Large gifts and your lifetime exemption

Your lifetime exemption is the total amount you can give away over your entire life before owing any gift tax. In 2024, that number is $13.61 million. This exemption is separate from your yearly $18,000 limit. Every time you file Form 709 to report a gift over $18,000, you are using up part of this lifetime pool.

The lifetime exemption is scheduled to drop significantly after 2025. Unless Congress changes the law, it will fall to roughly $7 million per person on January 1, 2026. If you plan to give away very large amounts, it may make sense to do so before the end of 2025 to lock in the higher exemption. Talk to a tax professional or estate attorney if you are considering gifts in the millions of dollars.

Gifts to minors and custodial accounts

You can give money or assets to a minor without triggering gift tax, as long as you stay under the yearly limit. The yearly limit applies whether the recipient is an adult or a child. If you give $18,000 to your 10-year-old grandchild, that counts the same as giving $18,000 to an adult.

If you want to give money to a minor and have someone else manage it until they turn 18 or 21, you can set up a custodial account under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). These are straightforward accounts offered by most banks and brokerages. The gift itself is not taxed any differently, but the account structure makes it clear that the money belongs to the child and is held in trust by a custodian (usually a parent or grandparent).

State gift taxes and other considerations

The federal government has a gift tax, but only a few states do. As of 2024, only Connecticut, Delaware, Illinois, Louisiana, Mississippi, New York, North Carolina, and Tennessee have state-level gift taxes or estate taxes that may explore to gifts. If you live in one of these states, check your state's tax rules, because the limits and rules may differ from federal rules.

Some gifts have tax consequences that are separate from gift tax. If you give appreciated assets like stocks or real estate, the recipient gets a "stepped-up basis," which means they inherit your cost basis for tax purposes. If you sell an appreciated asset and then give the proceeds, you owe capital gains tax on the sale, but the gift itself is not taxed. Talk to a tax professional if you are giving away investments or property worth more than $18,000.

Frequently Asked Questions

Do I owe gift tax if I give my child $25,000 in one year?

No. You file Form 709 to report the $7,000 over the yearly limit, but you owe no tax. The $7,000 counts against your lifetime exemption of $13.61 million (in 2024), which most people never reach. You file the form by April 15 of the following year.

Can I give my parent money without it being taxed?

Yes, up to $18,000 per year. Gifts are not taxed to the person who receives them, only to the person who gives them. As long as you stay under $18,000 per year per recipient, you file no form and owe no tax.

What if I give someone a car or jewelry instead of cash?

Gifts of property (a car, jewelry, art, or anything else) count the same as cash gifts. The value of the gift is what matters. If you give a car worth $22,000, you file Form 709 to report the $4,000 overage. You determine the value using the fair market value on the date you gave it.

Does my spouse have to file Form 709 if I give away money from our joint account?

Only if you both agree to split the gift. If you give $25,000 from a joint account to your child and do not split it, only you file Form 709. If you both want to split it (reporting it as $12,500 from each of you), you both file or indicate splitting on your joint return.

What happens if I do not file Form 709 when I should have?

The IRS may assess penalties and interest. If you gave more than $18,000 to one person in one year and did not file, contact a tax professional or the IRS to file the form as soon as possible. Filing late is better than not filing, and the IRS sometimes waives penalties for reasonable cause.