You usually don't pay income tax on gifts, but the person who gave it might
The short answer: if someone gives you money or property as a gift, you do not report it as income on your tax return, and you do not owe federal income tax on it. The IRS treats gifts differently from income—they are not considered payment for work or a return on investment.
However, there is a wrinkle. The person who gave you the gift may have to file a form with the IRS if the gift is large enough, though they still typically do not pay tax on it. This is called the gift tax, and it applies to the giver, not the receiver. For 2024, a person can give up to $18,000 per year to any one person without filing anything. Married couples can give $36,000 combined. Gifts above that threshold require the giver to file Form 709 (the gift tax return), though they still usually do not owe tax unless they have given away more than $13.61 million in their lifetime.
The key distinction: you receive the gift tax-free. The giver handles any paperwork on their end.
Key Takeaways
- Money or property you receive as a gift is not taxable income to you, and you do not report it on your federal tax return.
- The giver may need to file Form 709 if a single gift to one person exceeds $18,000 in a year, but they usually do not owe tax.
- Gifts from parents, relatives, friends, or employers are treated the same way under federal tax law—the amount does not matter for your taxes.
- Some states do not have a gift tax at all, and the federal gift tax only applies to very large lifetime transfers.
What counts as a gift for tax purposes
The IRS defines a gift as a transfer of money or property where you receive nothing of equal value in return. The giver must intend it as a gift—not a loan, not payment for services, not a prize or award. If your employer gives you a gift card worth $25 at the holidays, that is a gift. If your parent gives you $5,000 to help with rent, that is a gift. If a friend pays off your credit card debt as a birthday present, that is a gift.
The size of the gift does not matter for your taxes. A $100 gift and a $100,000 gift are treated the same way on your return: you do not report either one. The giver's filing obligation depends on the amount, but your tax liability does not.
Gifts of property work the same way. If someone gives you a car, jewelry, artwork, or real estate, you do not owe income tax on the fair market value of that property. You also do not inherit any capital gains tax liability from the giver—if they bought the car for $10,000 and it is now worth $15,000, you do not owe tax on that $5,000 gain when you receive it.
When the giver has to file Form 709
If you receive a gift larger than the annual threshold, the person who gave it to you will need to file Form 709 with the IRS. For 2024, that threshold is $18,000 per recipient per year. If your parent gives you $25,000, they file the form. If your spouse's parents each give you $15,000 in the same year, no form is required (each gift is under the threshold). If one parent gives you $20,000, they file.
Filing Form 709 does not mean the giver owes tax. It is a reporting form. The giver uses it to report the gift and reduce their lifetime exemption—a pool of money ($13.61 million for 2024) that they can give away over their entire life before owing federal gift tax. Most people never reach that limit, so filing the form is straightforward a record-keeping step.
The giver is responsible for knowing the threshold and filing if required. You do not need to do anything on your end, and you do not owe tax regardless of whether they file.
Gifts from employers and other special cases
Gifts from your employer are treated differently than gifts from family or friends. If your employer gives you a gift worth more than $25, the amount over $25 is considered taxable income to you, and your employer will report it on your W-2 form. A $50 gift card from your company means $25 is a non-taxable gift and $25 is taxable income. A $100 holiday bonus is entirely taxable income.
Gifts to charity are not the same as receiving a gift. If you donate money to a nonprofit, you may be able to deduct it on your tax return (if you itemize deductions), but that is a different tax rule entirely.
Prizes and awards are also taxed differently. If you win a contest, a lottery, or a game show, that is not a gift—it is taxable income, and the organization that gave it to you will report it on a Form 1099-MISC.
State gift taxes and inheritance taxes
Most states do not have a gift tax. Only a handful of states—Iowa, Kentucky, Maryland, New Jersey, and Pennsylvania—still have inheritance or estate taxes that might affect very large gifts or inheritances, and the rules vary by state. For federal purposes, you do not owe tax on gifts you receive, and most states follow the same rule.
If you receive an inheritance (money or property from someone who has died), that is also not taxable income to you. The estate itself may owe tax if it is large enough, but you receive your inheritance tax-free.
What you should keep in mind
Do not report gifts on your federal income tax return. If you receive a large gift, you do not need to file anything or contact the IRS. The giver handles any filing on their end.
If you are unsure whether something counts as a gift or as income (for example, if a family member gives you money but calls it a loan), document the intent. A written agreement or email saying "this is a gift, not a loan" can clarify things if questions come up later. In practice, the IRS rarely audits gift transactions unless the amounts are very large or there is a pattern suggesting the money is actually income.
Keep records of large gifts if you receive them, especially if they come from outside the United States or if you plan to use the money to buy property. Banks and financial institutions sometimes ask where large deposits came from, and being able to show a gift letter from the giver can speed up that process.
Frequently Asked Questions
Do I have to report a gift on my taxes?
No. Gifts are not reported as income on your federal tax return. You do not file any form or contact the IRS when you receive a gift, regardless of the amount. The giver may file Form 709 if the gift is large, but that does not affect your return.
What if someone gives me money and says it is a loan?
If it is truly a loan, you do not owe income tax on it (loans are not income). However, if the lender charges you interest, that interest is taxable income to them, not to you. If there is no written agreement and no interest, the IRS may treat it as a gift if audited. A straightforward written note saying "loan" or "gift" helps clarify intent.
Do I owe tax on an inheritance?
No. Inheritances are not taxable income to you. The estate of the person who died may owe estate tax if it is very large, but you receive your inheritance tax-free. This applies whether you inherit money, property, retirement accounts, or anything else.
What if my employer gives me a large gift?
Employer gifts are taxed if they exceed $25 per year. The amount over $25 is reported on your W-2 as taxable income. Your employer is responsible for calculating and reporting this, so you will see it reflected in your annual tax documents.
Can I give someone a large gift without filing Form 709?
You can give up to $18,000 per person per year (for 2024) without filing. If you give more than that to one person in a year, you file Form 709, but you usually do not owe tax. The threshold changes slightly each year, so check the current year's limit if you are planning a large gift.