The annual gift tax exclusion lets you give up to $18,000 per person per year with no tax consequences

You can give $18,000 to each child, grandchild, or any other person in 2024 without filing a gift tax return or reducing your lifetime exemption. This amount is called the annual exclusion. The IRS adjusts it every year for inflation, so the limit changes — it was $17,000 in 2023 and will likely be $19,000 or higher in 2025.

The key rule: the gift must be a present interest, meaning the recipient can use or access the money immediately. You cannot give money into a trust that restricts when they receive it and count it as a tax-free gift. You also cannot give the same $18,000 to the same person twice in one year and claim two exclusions.

If you give more than $18,000 to one person in a single year, you must file Form 709 with the IRS. Filing does not mean you owe tax — it means you are using part of your lifetime exemption instead. Most people never owe gift tax because the lifetime exemption is very high ($13.61 million in 2024), but the IRS still wants to track it.

Key Takeaways

  • You can give $18,000 per child per year (2024) without filing any tax forms or owing tax.
  • Gifts must be available to the recipient immediately; gifts into trusts with restrictions do not may have access to for the annual exclusion.
  • Giving more than $18,000 to one person in one year requires filing Form 709, though you likely will not owe tax if you stay under your lifetime exemption.
  • The annual exclusion amount changes each year with inflation, so check the current year's limit before making large gifts.
  • Spouses can combine their exclusions, allowing $36,000 per child per year if both give together.

What counts as a taxable gift

A gift is any transfer of money or property where you receive nothing of equal value in return. Paying a child's tuition directly to the school does not count as a gift and does not use your exclusion — the same applies to paying medical bills directly to the provider. These are called direct payments for education or medical care, and they have their own unlimited exclusion.

Loans to family members can be gifts if you do not charge interest or if the interest rate is below the IRS minimum (called the Applicable Federal Rate, or AFR). If you lend money to a child with no written agreement and no interest, the IRS may treat part or all of it as a gift. To avoid this, use a promissory note that states the interest rate, payment schedule, and term — even if the rate is low.

Forgiving a loan is treated as a gift in the year you forgive it. If you lend $25,000 to a child and later cancel the debt, that $25,000 counts as a gift and may require filing Form 709.

Gifts from both spouses

If you are married and file jointly, you and your spouse can each give $18,000 to the same person in the same year, for a total of $36,000 with no tax filing required. This is called gift splitting. You do not need your spouse's permission to split a gift — if you give $36,000 from a joint account to your child, you can report it as $18,000 from each spouse.

If you give more than $18,000 but less than $36,000 from a joint account, you can still use gift splitting by filing Form 709. This tells the IRS that you and your spouse are each claiming half the gift against your individual exclusions. Without filing, the IRS assumes the entire amount came from the spouse whose name is on the account.

Gifts to minors and trusts

Giving money directly to a minor child counts toward your annual exclusion. However, minors cannot legally control bank accounts or investments, so you may want to set up a custodial account under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). Money in these accounts belongs to the child, but you or another adult manages it until the child reaches the age of majority (usually 18 or 21, depending on state law).

Gifts into a custodial account still may have access to for the annual exclusion because the child has the present right to the money — the custodian simply manages it on their behalf. When the child reaches age of majority, the account transfers to them automatically.

Gifts into a regular trust may not may have access to for the annual exclusion if the trust restricts when the child can receive or use the money. A trust that says "the child receives income at age 25 and principal at age 35" does not may have access to. However, a trust that gives the child the right to withdraw the money immediately (called a Crummey trust) can may have access to for the exclusion if you notify the child of their withdrawal right.

What happens if you exceed the annual limit

Exceeding $18,000 in gifts to one person in one year does not result in a penalty or immediate tax bill. Instead, you file Form 709 to report the excess and it counts against your lifetime exemption. In 2024, your lifetime exemption is $13.61 million — the total amount you can give away over your entire life before owing federal gift tax.

Most people never use their lifetime exemption because $13.61 million is a very high threshold. However, if you give away more than that amount during your lifetime, or if your estate exceeds that amount when you die, federal gift and estate tax may apply. The lifetime exemption also decreases after 2025 — it is scheduled to drop to roughly $7 million per person unless Congress changes the law.

Filing Form 709 does not mean you owe tax. It is simply a record-keeping form that tells the IRS you are using part of your lifetime exemption. You file it with your tax return in the year you make the gift.

State gift taxes

Most states do not have a gift tax, but a few do. Connecticut, Delaware, Louisiana, North Carolina, and Tennessee have some form of gift or transfer tax, though the rules and thresholds vary. If you live in one of these states or give to someone who does, check your state tax authority's website for the current rules.

State gift taxes are separate from federal gift tax. You could owe state tax even if you do not owe federal tax, or vice versa. Some states have much lower exemptions than the federal government, so it is worth verifying before making large gifts.

Frequently Asked Questions

Can I give my child $18,000 and then give them another $18,000 later in the same year?

No. The $18,000 annual exclusion is per person per calendar year. If you give $18,000 in January and another $18,000 in December to the same child, the second gift exceeds the limit and requires filing Form 709. The first $18,000 is tax-free; the second $18,000 counts against your lifetime exemption.

Does paying my child's college tuition count as a gift?

No. Direct payments to the school for tuition do not count as gifts and do not use your annual exclusion. Room and board, books, and other expenses paid to the child or a third party (not the school) do count as gifts. You can pay unlimited tuition directly to the institution without any tax consequences.

What if I give my child money and they give it back to me later?

A gift is a one-way transfer. If your child gives money back, that is a separate gift from them to you. The IRS does not treat it as a reversal of your original gift. If you are concerned about this, document the original transfer as a loan with a promissory note instead.

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

No. Gifts under the annual exclusion do not require any filing or reporting. You only file Form 709 if you give more than $18,000 to one person in one year, or if you and your spouse are splitting a gift and want to report it that way.

What if I give money to my adult child's spouse?

Your child's spouse is a separate person for gift tax purposes. You can give $18,000 to your child and $18,000 to their spouse in the same year, for a total of $36,000, with no tax filing required. If you are married, you and your spouse can each give $18,000 to both of them, for a total of $72,000.