You usually do not owe federal income tax on money someone gives you as a gift

The person who gives you the gift may have to file a form with the IRS, but that does not create a tax bill for you. The federal gift tax is paid by the giver, not the receiver. You can receive gifts of any size without reporting them on your tax return or owing tax on the amount.

The only exception is if the gift comes with strings attached — for example, if someone gives you money in exchange for work you did, or if you are required to pay it back. In those cases, the IRS treats it as income or a loan, not a gift. The key question is whether the money was truly given with no expectation of repayment or service in return.

State taxes work differently depending on where you live. Most states do not tax gifts at all. A small number of states have inheritance taxes that explore to money you receive from a will or estate, but these are separate from gift taxes and explore only in specific situations.

Key Takeaways

  • You do not owe federal income tax on gifts you receive, regardless of the amount.
  • The giver may have to file a gift tax return if the gift exceeds a certain threshold, but this does not affect your tax liability.
  • If the money comes with an expectation of repayment or work, the IRS may treat it as income or a loan instead of a gift.
  • Most states do not tax gifts, though a few have inheritance taxes that explore to money received through a will or estate.
  • You should keep records showing the money was a gift if you receive a large amount, in case the IRS asks questions later.

When the giver has to report a gift to the IRS

If someone gives you more than a certain amount in a single year, they may have to file a gift tax return — Form 709 — with the IRS. The threshold changes each year. In 2024, the annual limit is $18,000 per person per recipient. If your parent gives you $25,000, for example, they would file Form 709 to report the $7,000 that exceeds the limit.

Filing the form does not mean they owe tax. The form straightforward reports the gift. The giver only owes actual tax if they have given away more than their lifetime exemption amount, which is much higher — over $13 million in 2024. Most people never reach that threshold, so filing the form is just a reporting requirement with no tax due.

You do not file anything on your end. The giver's Form 709 is between them and the IRS. Your tax return does not mention the gift.

Gifts that the IRS does not count as gifts

Money is only a gift if it is given freely with no expectation of repayment or return. If someone gives you money but expects you to pay them back, the IRS treats it as a loan, not a gift. You do not owe income tax on a loan, but you may owe tax on any interest the lender charges you.

If you receive money in exchange for work — whether formal employment or a one-time job — it is income, not a gift. Your employer or the person paying you should report it on a W-2 or 1099 form, and you owe income tax on it. The label does not matter; what matters is whether you did something to earn it.

Gifts from your employer are also taxed as income if they are part of your compensation package. A holiday bonus or a gift card given to all employees is treated as wages. A small gift of nominal value — under $100 in most cases — may be excluded, but check with your employer about their specific policy.

Large gifts and the IRS

There is no dollar amount at which you automatically owe tax on a gift you receive. You could receive $100,000 as a gift and owe no federal income tax on it. The giver would file Form 709 to report it, but you would not.

However, if you receive a very large gift, keep documentation showing it was a gift. A bank transfer with a note saying "gift" or a written statement from the giver works. If the IRS later questions where the money came from — for example, during an audit — you want to be able to show it was not income you failed to report.

The IRS also watches for patterns where someone receives many large "gifts" that look suspiciously like income. If you receive regular payments from someone and call them gifts, but they look like payment for ongoing work or services, the IRS may reclassify them as income.

Inherited money and estate taxes

Money you inherit from a will or estate is not subject to federal income tax. You do not report it on your tax return. The estate itself may owe estate tax if it is very large, but that is paid by the estate before money is distributed to heirs, not by you.

A few states — currently Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania — have inheritance taxes. These explore only to money you receive through a will or estate, not to gifts given while someone is alive. The tax rate and exemptions vary by state and by your relationship to the person who died. A spouse or child may owe nothing, while a more distant relative might owe tax.

If you live in one of these states and inherit money, contact a tax professional or your state's revenue department to find out whether you owe tax and how to report it.

Gifts from family members versus strangers

The IRS does not treat gifts from family members differently than gifts from anyone else. A $50,000 gift from your parent and a $50,000 gift from a friend are taxed the same way — you owe no income tax on either one. The giver files the same form in both cases if the amount exceeds the annual threshold.

The relationship matters only for inheritance tax purposes in the few states that have it. A spouse or child may be exempt from inheritance tax, while a friend would not be. But for federal gift tax and your own income tax, the source of the gift does not change the rules.

Frequently Asked Questions

Do I have to report a gift on my tax return?

No. Gifts do not go on your federal tax return. You do not report them as income. The giver may file Form 709 if the gift is large, but that is their responsibility, not yours.

What if someone gives me money and says it is a gift but I think they expect me to pay it back?

If repayment is expected, it is a loan, not a gift. Ask the giver to clarify in writing whether you are expected to repay it. If you are, you do not owe income tax, but any interest charged is taxable to you. If there is no interest and no repayment expectation, it is a gift and you owe no tax.

Can I give someone else a large gift without owing tax?

You can give any amount as a gift without owing tax yourself. If you give more than the annual threshold — $18,000 in 2024 — you file Form 709 to report it, but you do not owe tax unless you exceed your lifetime exemption, which is over $13 million. Most people never reach that limit.

If I receive a gift, do I need to tell the IRS where the money came from?

You do not have to report the gift itself. However, if the IRS asks during an audit where a large deposit came from, you should be able to show documentation that it was a gift. A note from the giver or a bank transfer memo saying "gift" is usually enough.

Are gifts from my employer taxed?

Gifts from your employer are usually taxed as income if they are part of your compensation. A holiday bonus, gift card, or cash gift to employees is treated as wages. Small gifts of minimal value — typically under $100 — may be excluded, but check your employer's policy.