The Short Answer: Usually No, But It Depends on the Amount and Who Gives It
You do not owe federal income tax on money someone gives you as a gift, no matter how much it is. The person who gives the gift may have to file a form with the IRS if the amount is large enough, but that does not create a tax bill for you. The only time a gift becomes taxable to you is if it generates income afterward — for example, if someone gives you $10,000 and you deposit it in a savings account, you pay tax on the interest it earns, not on the original $10,000.
State taxes vary. Most states do not tax gifts at all. A small number of states — Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania — have inheritance or estate taxes that may explore to gifts received from a deceased person's estate, but these are separate from income tax and explore only in specific situations.
Key Takeaways
- Gifts are not taxable income to you under federal law, regardless of the dollar amount.
- The person giving the gift may need to file a form with the IRS if the gift exceeds $18,000 per person per year (the 2024 limit), but this does not create a tax bill for you.
- Interest, dividends, or other income generated by a gifted amount is taxable to you, even though the original gift is not.
- Six states have inheritance taxes that may explore to gifts received from a deceased person's estate, depending on your relationship to the person who died.
When the IRS Requires the Giver to File a Form
If someone gives you more than $18,000 in a single year (as of 2024; this amount changes yearly), the person who gave it to you must file Form 709 with the IRS. This is called a gift tax return. However, filing this form does not mean you owe tax or that the giver owes tax — it is straightforward a report to the IRS that a large gift was made.
The giver only owes actual tax on gifts if they have given away more than $13.61 million in their lifetime (as of 2024). This is called the lifetime gift tax exemption, and it is so high that most people never reach it. The exemption amount changes each year and is set by federal law.
If you receive a gift, you do not need to file anything or report it to the IRS. The responsibility to report large gifts falls entirely on the person who gave the money.
Gifts Versus Loans: Why the Distinction Matters
The IRS distinguishes between a gift and a loan. A gift is money given with no expectation of repayment. A loan is money given with the understanding that you will pay it back, usually with interest.
If someone claims they gave you a loan but you never repay it, the IRS may treat it as a gift after all — and the person who lent the money may face questions about why they did not report it as such. To protect both yourself and the lender, put any loan agreement in writing, even if it is informal. The agreement should state the amount, the repayment schedule, and the interest rate (if any). If there is no interest rate, the IRS has minimum rates that explore; if the actual rate is lower, the difference may be treated as a gift.
If the loan is forgiven — meaning the lender says you no longer have to repay it — that forgiveness may be treated as a gift, and the lender may need to file a form if the amount is large enough.
Income Generated by a Gift Is Taxable to You
The gift itself is not taxable, but any income it produces is. If someone gives you $50,000 and you invest it, you owe tax on any interest, dividends, or capital gains that result from that investment. You report this income on your tax return just as you would if you had earned it yourself.
The same rule applies to gifts of property. If someone gives you stock worth $5,000 and the stock later sells for $7,000, you owe tax on the $2,000 gain. The original $5,000 gift is not taxable, but the profit is.
State Inheritance and Estate Taxes on Gifts from Deceased People
If you receive money or property from someone who has died, the rules are different from a gift between living people. Six states — Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania — have inheritance taxes. These taxes explore to money or property you receive from a deceased person's estate, and the amount you owe depends on your relationship to the person who died.
In these states, close relatives (spouses, children, parents) often pay little or no tax, while more distant relatives and unrelated people may owe a percentage of what they receive. The person managing the estate usually handles the tax filing, not you, but you may receive a bill if you are named as owing a share.
Federal estate tax applies only to very large estates — those worth more than $13.61 million as of 2024. Unless the person who died was extremely wealthy, federal estate tax will not affect you.
How to Report a Gift on Your Tax Return
You do not report gifts on your federal income tax return at all. There is no line for gifts received, and you should not add the gift amount to your income. The only time you report anything related to a gift is if the gift generates income — in which case you report the income, not the gift itself.
If you receive a large gift and are unsure whether you need to do anything, the safest approach is to do nothing. The burden of reporting falls on the giver, not you. If the IRS has questions, they will contact the person who gave the money, not you.
Frequently Asked Questions
Do I have to report a gift to the IRS?
No. You do not report gifts on your tax return. The person who gave you the gift may need to file a form if the gift is large, but you have no reporting requirement.
What if someone gives me cash — do I have to pay tax on that?
No. Cash gifts are not taxable income to you, whether the gift is $100 or $100,000. The IRS does not tax gifts based on how they are delivered.
If my parents give me money for a down payment on a house, is that taxable?
No. The gift itself is not taxable. However, if you later sell the house for a profit, you owe tax on the gain. The original gift does not affect your tax bill.
Can I give someone else money without them owing tax?
Yes. The person receiving the gift owes no tax. If you give more than $18,000 in a year, you may need to file a form, but the recipient has no tax obligation.
What if a gift comes with strings attached — like I have to use it for college?
It is still a gift and not taxable to you. The condition on how you use it does not change the tax treatment. The only exception is if the gift is actually payment for work or services, in which case it would be taxable income.