The Annual Exclusion: What You Can Give Each Year

You can give up to $18,000 per person per year (as of 2024) without filing a gift tax return with the IRS. This is called the annual exclusion. If you give more than this amount to one person in a single year, you must file Form 709 with the IRS, even if you owe no tax.

The annual exclusion amount changes every two years based on inflation. It was $17,000 in 2023 and $18,000 in 2024. The IRS announces the new amount in October of each even-numbered year, effective January 1 of the following year. You can find the current year's amount on the IRS website or by calling the IRS directly.

The exclusion applies to gifts of money, property, investments, or anything else of value. It does not matter whether the gift is in cash or another form. Each person you give to has their own separate $18,000 limit — you can give $18,000 to your daughter, $18,000 to your son, and $18,000 to your grandchild in the same year without filing.

Key Takeaways

  • You can give $18,000 per person per year (2024) without filing a gift tax return, and this amount increases every two years with inflation.
  • If you give more than the annual exclusion to one person in a single year, you must file Form 709 even if you owe no tax.
  • Married couples can combine their exclusions, allowing them to give $36,000 per person per year if both spouses agree in writing on the tax return.
  • Gifts to spouses with no citizenship limit, gifts for tuition or medical bills paid directly to the provider, and gifts to political organizations do not count against your exclusion.
  • Exceeding the annual exclusion does not immediately create a tax bill — it reduces your lifetime exemption, which is currently $13.61 million per person.

Married Couples and Gift Splitting

If you are married, you and your spouse can combine your annual exclusions through a process called gift splitting. This means you can give $36,000 per person per year (2024) instead of $18,000 each. Both spouses must agree to split gifts, and you must file a gift tax return (Form 709) to report the split, even if you owe no tax.

Gift splitting works only if you are married at the time of the gift and both spouses are U.S. citizens or residents. If you divorce during the year, you can still split gifts made before the divorce if you file the return together. You do not need to split all your gifts — you can choose to split some gifts and not others in the same year.

Gifts That Do Not Count Against Your Limit

Certain gifts are completely exempt from the annual exclusion and do not require you to file a return. Gifts to your spouse (if your spouse is a U.S. citizen) have no limit at all. You can give your spouse any amount of money or property without filing or paying tax.

Tuition and medical bills paid directly to the school or medical provider do not count as gifts and have no limit. You can pay your grandchild's college tuition or your parent's hospital bill directly to the institution without using any of your annual exclusion. The payment must go straight to the provider — if you give money to the person and they pay the bill, it counts as a regular gift.

Gifts to political organizations and charitable donations to may have access to nonprofits do not count against your annual exclusion. You can give unlimited amounts to these organizations. Charitable gifts may also reduce your taxable income if you itemize deductions on your tax return.

What Happens If You Exceed the Annual Exclusion

If you give more than $18,000 to one person in a single year, you do not immediately owe gift tax. Instead, the excess amount reduces your lifetime exemption. The lifetime exemption is the total amount you can give away during your lifetime and at death before any gift or estate tax applies. As of 2024, the lifetime exemption is $13.61 million per person.

For example, if you give $25,000 to your daughter in 2024, you exceed the annual exclusion by $7,000. You must file Form 709 to report this gift. The $7,000 does not create a tax bill now, but it reduces your lifetime exemption from $13.61 million to $13.603 million. You still have plenty of room before owing any tax.

The lifetime exemption is scheduled to drop to approximately $7 million per person on January 1, 2026, unless Congress changes the law. This means gifts that exceed the annual exclusion will reduce your available exemption more quickly starting in 2026. If you plan to give large amounts, the timing of those gifts may matter for your tax situation.

Filing Form 709 When You Must Report a Gift

You file Form 709 (United States Gift and Generation-Skipping Transfer Tax Return) with the IRS when you give more than the annual exclusion to one person in a single year. You file it with your regular income tax return on April 15 of the following year, or by October 15 if you file an extension.

Form 709 requires you to list each gift over the annual exclusion amount, the date of the gift, the recipient's name and address, and the value of what you gave. You do not need to report gifts under the annual exclusion limit, but you must report all gifts over the limit to the same person, even if you do not owe tax.

If you are married and splitting gifts, both spouses must sign the Form 709 and file it together with the joint tax return. Filing the return does not mean you owe tax — it simply notifies the IRS of the gift and documents that you are using part of your lifetime exemption.

Gifts That Count as Taxable Income to the Recipient

In the United States, the person who receives a gift does not pay income tax on it. Gifts are not considered income, so your daughter does not report the $18,000 you gave her as taxable income on her tax return. The gift tax is paid by the giver, not the receiver — and only if the giver exceeds their exemption.

This is different from other types of transfers. If you pay someone's bills as payment for work they did, that is wages and they must report it as income. If you lend money and charge interest, the interest is taxable income to you. But a true gift with no strings attached and no expectation of repayment is not taxable to either person.

State Gift Taxes and Other Considerations

The federal gift tax is the only gift tax most people encounter. However, a small number of states have their own gift tax or estate tax. Connecticut, Delaware, Illinois, Iowa, Kentucky, Maryland, Nebraska, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee, Vermont, and Washington have some form of estate or inheritance tax, but most do not have a separate gift tax.

If you live in or give to someone in one of these states, check your state's tax rules. State thresholds and exemptions are often lower than the federal limits. Your state tax return may require you to report gifts even if the federal return does not.

Gifts of certain property — such as real estate, investments, or business interests — may have additional tax consequences beyond the gift tax itself. When you give appreciated property, the recipient receives your original cost basis, which can affect their taxes if they later sell it. Consult a tax professional if you plan to give property other than cash.

Frequently Asked Questions

Do I have to report gifts under $18,000?

No. You do not file Form 709 or report gifts under the annual exclusion limit. You only file when you give more than $18,000 to one person in a single year. Gifts under the limit are completely private and require no IRS reporting.

Can I give $18,000 to multiple people without filing?

Yes. The $18,000 limit applies per person per year. You can give $18,000 to each of ten people in the same year without filing. Each recipient has their own separate exclusion. You only file if you give more than $18,000 to any single person.

What if I give someone money and they use it to pay my debt?

If you give someone money as a gift and they choose to use it to pay your debt, it is still a gift and counts against your annual exclusion. The intent at the time of the gift is what matters. If you intended to give them money with no strings attached, it is a gift even if they later use it for your benefit.

Does a loan count as a gift?

A loan is not a gift if you have a written agreement stating the amount, the interest rate, and the repayment schedule. The IRS requires a minimum interest rate (the Applicable Federal Rate, or AFR) to treat it as a loan rather than a gift. If you lend money with no written agreement or no interest, the IRS may treat it as a gift.

Can I give away my entire lifetime exemption now to avoid losing it in 2026?

You can give away amounts over the annual exclusion now, which uses your lifetime exemption. However, you will still owe no tax as long as you stay under the current $13.61 million limit. If the exemption drops in 2026 and you have already used part of it, you cannot get that exemption back. Consult a tax professional about whether timing large gifts makes sense for your situation.