The 2025 annual gift tax exclusion is $18,000 per person

You can give up to $18,000 to any individual in 2025 without filing a gift tax return or reducing your lifetime exemption. This amount applies to each person you give to — so you could give $18,000 to your child, $18,000 to your grandchild, and $18,000 to a friend, all in the same year, with no tax consequences.

The exclusion applies to gifts of money, property, investments, or anything else of value. It resets on January 1 each year. If you give more than $18,000 to one person in a single year, you must file Form 709 (the gift tax return) with the IRS, even if you owe no tax.

Married couples can combine their exclusions. If you are married and file jointly, you and your spouse together can give $36,000 to each person without filing or tax consequences. This is called "gift splitting" and requires both spouses to consent on the return.

Key Takeaways

  • The 2025 exclusion is $18,000 per recipient per year; gifts within this amount require no filing or tax payment.
  • Married couples can give $36,000 per person per year by combining their exclusions through gift splitting.
  • Gifts above the exclusion require filing Form 709 but do not trigger tax unless your lifetime gifts exceed $13.61 million.
  • Certain gifts are never counted against the exclusion: tuition paid directly to a school, medical expenses paid directly to a provider, and gifts to your spouse.
  • The exclusion amount changes most years based on inflation; the IRS announces the new figure in October for the following year.

How the exclusion works with your lifetime exemption

The annual exclusion and the lifetime exemption are separate. The annual exclusion lets you give $18,000 per person per year with no paperwork. The lifetime exemption is the total amount you can give away during your life and at death before federal gift and estate tax applies.

For 2025, your lifetime exemption is $13.61 million. If you give more than $18,000 to one person in a year, you file Form 709 and the excess counts against your lifetime exemption. For example, if you give $25,000 to your daughter, the extra $7,000 reduces your lifetime exemption from $13.61 million to $13.603 million. You still owe no tax — you are just using up your exemption.

Most people never hit the lifetime limit. You would need to give away millions of dollars over many years to exhaust it. The lifetime exemption is also scheduled to drop significantly after 2025 — it is set to fall to roughly $7 million per person in 2026 unless Congress changes the law.

Gifts that do not count against the exclusion

Some gifts are never subject to the annual exclusion or lifetime exemption. The most common are tuition and medical expenses paid directly to the provider. If you pay your grandchild's college tuition directly to the university, that payment does not count as a gift and does not reduce your exclusion. The same applies to medical bills paid directly to a hospital or doctor.

Gifts to your spouse are also unlimited and never count against your exclusion, as long as your spouse is a U.S. citizen. Gifts to charities and political organizations are unlimited as well. Gifts to your spouse who is not a U.S. citizen have a separate annual exclusion of $185,000 for 2025.

Transfers to a trust can be trickier. A gift to a trust counts against your exclusion unless the trust is structured to allow the recipient to withdraw the money when ready — these are called "Crummey trusts." If you are considering a trust, a tax professional can explain whether your gift will use the exclusion.

When you must file Form 709

You file Form 709 (United States Gift and Generation-Skipping Transfer Tax Return) when you give more than $18,000 to one person in a calendar year. You file it with your federal income tax return on April 15 of the following year, or by the extended important date if you file for an extension.

Filing Form 709 does not mean you owe tax. It straightforward reports the gift to the IRS and documents that the excess is being charged against your lifetime exemption. The form asks for the recipient's name, address, and Social Security number, the date of the gift, and its value.

If you are married and using gift splitting, both spouses must sign the return, even if only one of you made the gift. If you fail to file when required, the IRS can assess penalties, though they are often waived if you have a reasonable cause.

How the exclusion changes year to year

The IRS adjusts the annual exclusion for inflation each year. It has risen from $17,000 in 2023 to $17,000 in 2024 to $18,000 in 2025. The adjustment happens in $1,000 increments — the exclusion only moves up when inflation pushes it high enough to cross the next thousand-dollar threshold.

The IRS announces the new exclusion amount in October, effective January 1 of the following year. You can find the current year's exclusion on the IRS website or in the annual gift tax tables. If you are planning large gifts, check the IRS announcement in the fall to see whether the exclusion will change.

State gift taxes and the federal exclusion

The federal annual exclusion applies only to federal gift tax. A handful of states — Connecticut, Delaware, Illinois, Louisiana, Mississippi, North Carolina, and Tennessee — have their own state gift taxes with different rules and exclusion amounts.

If you live in or give to someone in a state with a gift tax, you may need to file a state return even if you do not owe federal tax. State exclusions and rates vary widely. For example, Connecticut has a state gift tax with its own exclusion and rates. If you are in one of these states, check your state tax authority's website or consult a tax professional about state-level requirements.

Frequently Asked Questions

Can I give more than $18,000 if I do not file Form 709?

No. If you give more than $18,000 to one person in a year, you must file Form 709 to report it, even if you owe no tax. Failure to file can result in penalties. Filing the form is the legal requirement; the tax itself depends on your lifetime exemption.

Does the exclusion reset if I give money back to someone?

No. If you give your child $18,000 and they return $5,000 to you, you have still used your full $18,000 exclusion for that year. The return of money does not restore the exclusion. Each calendar year is separate.

What if I give someone a loan instead of a gift?

A loan is not a gift if it is a genuine loan with a written agreement, a set repayment schedule, and interest at or above the IRS minimum rate (the applicable federal rate, or AFR). If you do not charge interest or have no written agreement, the IRS may treat it as a gift and it will count against your exclusion.

Can I carry over unused exclusion to next year?

No. The annual exclusion does not roll over. If you give only $10,000 to your daughter in 2025, you cannot use the remaining $8,000 in 2026. Each year you get a fresh $18,000 per person to give.

Do I need to report gifts under $18,000 to the IRS?

No. Gifts within the annual exclusion require no filing or reporting. You can give $18,000 to as many people as you want in a year without any IRS paperwork. Only gifts above the exclusion require Form 709.