The 2025 lifetime gift tax exemption is $13.61 million per person

The lifetime gift tax exemption is the total amount of money and property you can give away during your life without owing federal gift tax. For 2025, that limit is $13.61 million per person. If you are married, your spouse has a separate $13.61 million exemption, so a married couple can give away $27.22 million combined before any gift tax applies.

This exemption resets each year based on inflation. The amount was $13.61 million in 2024 as well. It is scheduled to drop to roughly $7 million per person in 2026 unless Congress changes the law, because the current higher exemption expires at the end of 2025 under rules set in 2017.

The exemption covers gifts of cash, real estate, investments, business interests, and other property. It does not matter whether you give the gift to family members, friends, or charity — the exemption applies the same way. You do not owe tax on the gifts themselves; instead, using the exemption reduces the amount you can pass on tax-free when you die.

Key Takeaways

  • You can give away $13.61 million in 2025 without owing federal gift tax, and your spouse has a separate $13.61 million exemption.
  • Gifts to spouses and charities do not count against your exemption at all, regardless of amount.
  • Using your exemption during life reduces the amount you can pass on tax-free at death, because the exemption is a combined lifetime and estate limit.
  • The exemption drops to approximately $7 million per person in 2026 unless Congress extends the current rules.
  • You must file a gift tax return (Form 709) to report large gifts, even if you owe no tax, so the IRS can track your exemption use.

How the exemption works with the annual gift tax exclusion

The lifetime exemption is separate from the annual gift tax exclusion, which is $18,000 per person for 2025. You can give up to $18,000 to as many people as you want each year without using any of your lifetime exemption. If you give more than $18,000 to one person in a year, the amount over $18,000 counts against your $13.61 million lifetime exemption.

For example, if you give your child $25,000 in 2025, the first $18,000 is covered by the annual exclusion. The remaining $7,000 counts against your lifetime exemption, leaving you with $13.604 million in exemption remaining. If you give your spouse or a registered charity any amount, neither the annual exclusion nor the lifetime exemption applies — those gifts are unlimited and tax-free.

The annual exclusion also increases with inflation each year. It was $17,000 in 2023 and $18,000 in 2024 and 2025. The IRS announces the new amount each October for the following year.

Why the exemption matters for your estate plan

The lifetime gift exemption and the estate tax exemption are the same pool of money. If you use $2 million of your exemption by giving gifts during your life, you have only $11.61 million left to shield your estate from federal tax when you die. This is called the unified credit — one exemption that covers both lifetime gifts and property you leave behind.

Many people use part of their exemption during life to reduce the size of their taxable estate, especially if they own appreciating assets like real estate or business interests. By giving away property now, you remove future growth from your estate. For instance, if you give $500,000 in stock to your child and that stock doubles in value, the $500,000 gain is not part of your taxable estate.

However, using the exemption is not required. If your estate is smaller than $13.61 million, you may not owe any federal estate tax regardless of whether you give gifts during life. State estate taxes are different and may explore at lower thresholds, so check your state's rules.

What happens if you give away more than your exemption

If you give away more than $13.61 million in 2025 (excluding annual exclusion gifts and gifts to spouses or charities), you owe federal gift tax on the excess. The tax rate is 40 percent. For example, if you give away $14 million, the $390,000 over your exemption is taxed at 40 percent, meaning you owe $156,000 in gift tax.

You must file Form 709 (the gift tax return) to report gifts over the annual exclusion, even if you do not owe tax because you have exemption remaining. Filing the form tells the IRS how much of your exemption you have used. If you do not file when required, the IRS may not count the exemption you thought you used, which could create problems for your estate later.

Gift tax is paid by the person making the gift, not the recipient. The recipient does not owe income tax on the gift, and the gift does not count as income on their tax return.

The exemption drop in 2026 and planning ahead

Unless Congress acts, the lifetime exemption will fall from $13.61 million to approximately $7 million per person on January 1, 2026. This is a significant drop, and some people with large estates are making large gifts in 2025 to use the higher exemption before it shrinks.

If you think you might want to make substantial gifts, it is worth reviewing your situation before the end of 2025. You do not need to rush or make gifts you are uncomfortable with — the decision depends on your personal finances, your family situation, and your goals. A tax professional or estate planning attorney can help you understand whether using the exemption now makes sense for you.

Keep in mind that the exemption rules could change again if Congress passes new legislation. The current exemption amounts are set by law and can be modified by future Congress. Planning based on the current rules is reasonable, but it is also wise to revisit your plan if the law changes.

Gifts that do not count against your exemption

Certain gifts are unlimited and never count against your lifetime exemption. Gifts to your spouse (if your spouse is a U.S. citizen) are unlimited. Gifts to registered charities are unlimited. Gifts that fall within the annual exclusion ($18,000 per person in 2025) do not count against your lifetime exemption.

Payments made directly to a medical provider or school on behalf of someone else also do not count against your exemption, as long as you pay the provider or school directly — not the person receiving the care or education. For example, if you pay your grandchild's college tuition directly to the university, that payment is not a taxable gift. If you give your grandchild $50,000 and they pay the tuition, the full $50,000 counts as a gift.

Frequently Asked Questions

Do I have to file a gift tax return if I give someone money?

You must file Form 709 if you give more than $18,000 to one person in 2025, even if you do not owe tax because you have exemption remaining. If all your gifts are $18,000 or less per person, or if you give to your spouse or charity, you do not need to file.

If I give away $5 million now, can I still give away $8.61 million when I die?

No. The lifetime exemption is a combined limit. If you use $5 million during your life, you have $8.61 million left to shield your estate from tax at death. Any estate value above that remaining amount is subject to the 40 percent federal estate tax.

Does my spouse's exemption help me if I have already used mine?

Your spouse's exemption is separate and belongs to them. However, married couples can use a strategy called "portability" to allow the surviving spouse to use the deceased spouse's unused exemption. This requires filing an estate tax return even if no tax is owed. A tax professional can explain whether this applies to your situation.

What if I give someone a gift and they do not want it?

If the recipient refuses the gift, it is not considered a completed gift for tax purposes, so it does not count against your exemption. However, the refusal must be documented and happen within a reasonable time after the gift is offered.

Does the exemption explore to state gift taxes?

The federal exemption applies only to federal gift tax. Some states have their own gift or estate taxes with lower exemption amounts. You need to check your state's rules separately, as they vary widely.