The annual exclusion lets you give money tax-free up to a set amount per person each year

You can give up to $18,000 per person per year (in 2024) without filing a gift tax return with the IRS. This is called the annual exclusion. If you stay under this limit, you owe no gift tax and file nothing — the IRS does not need to know about the gift at all.

The annual exclusion amount changes most years. The IRS adjusts it for inflation, usually in $1,000 increments. Check the current year's limit on the IRS website before you give large sums, because the number you see this year may not be the same next year.

If you are married, your spouse can give the same amount to the same person in the same year, and those gifts do not combine. A married couple can together give $36,000 to one person annually without either spouse filing a return.

Key Takeaways

  • You can give up to $18,000 per person per year (2024) without filing a gift tax return or owing any tax.
  • The annual exclusion applies separately to each person you give money to, so you can give $18,000 to your child and $18,000 to your grandchild in the same year.
  • Gifts to your spouse have no limit at all, and gifts to charities do not count against the exclusion.
  • If you give more than the annual exclusion to one person in one year, you file Form 709 but usually still owe no tax — you are just using part of your lifetime exemption.
  • The annual exclusion resets on January 1 each year, so a gift on December 31 and another on January 1 are in different tax years.

How the annual exclusion works with multiple recipients

The $18,000 limit applies to each person you give money to, not to your total giving. If you give $18,000 to your daughter, $18,000 to your son, and $18,000 to your grandchild in the same year, you have given $54,000 total and owe no gift tax on any of it.

This matters because many people think they have one pool of $18,000 to divide among everyone. They do not. Each recipient gets their own $18,000 allowance. You can give to as many people as you want, as long as you do not exceed $18,000 to any single person in a single calendar year.

Gifts to spouses and charities do not count

You can give unlimited money to your spouse with no tax consequences and no filing required. This is called the unlimited marital deduction. Your spouse's citizenship matters: if your spouse is not a U.S. citizen, the limit is lower (currently $185,000 per year in 2024), but U.S. citizens have no cap.

Gifts to may have access to charities also have no limit and do not count against your annual exclusion. If you give $50,000 to a registered nonprofit and $18,000 to your nephew in the same year, you file nothing and owe nothing.

What happens if you give more than $18,000 to one person

If you give $25,000 to your child in one year, you have exceeded the annual exclusion by $7,000. You must file Form 709 (United States Gift Tax Return) with the IRS. However, filing the form does not mean you owe tax.

The $7,000 overage counts against your lifetime exemption, which is much larger. In 2024, your lifetime exemption is $13.61 million. Most people never use it up. The form tells the IRS you used $7,000 of your exemption, but you owe no tax unless and until your lifetime giving exceeds the full exemption amount.

The lifetime exemption is per person, not per couple. If you are married, you and your spouse each have your own $13.61 million exemption. Your spouse's giving does not reduce your exemption.

Timing matters: gifts in different calendar years

The annual exclusion resets on January 1. A gift on December 31 and another gift on January 1 are in different tax years and do not combine. If you give $18,000 to your daughter on December 31, 2024, and another $18,000 on January 1, 2025, you have not exceeded the limit in either year.

This is useful if you are planning large gifts. You can time them to fall in different calendar years and stay under the annual exclusion in each year. However, the IRS looks at the date the gift is complete — when the recipient has full control of the money — not the date you write the check.

Loans are not gifts, but they have rules too

If you lend money to a family member instead of giving it, the loan does not count as a gift and does not use your annual exclusion. However, the IRS requires that loans above a certain amount charge interest. In 2024, loans under $10,000 can be interest-free, but larger loans must have an interest rate at least equal to the IRS's applicable federal rate (AFR), which changes monthly.

If you make a large interest-free loan, the IRS may treat the unpaid interest as a gift. To avoid this, put the loan in writing, specify the repayment terms, and charge at least the minimum interest rate. The AFR for the month you make the loan is what applies.

Frequently Asked Questions

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

No. If you stay under the annual exclusion, you do not file anything with the IRS. The gift is not reported. You only file Form 709 if you give more than $18,000 to one person in one year.

Can I give $18,000 to my child and have them give it to their spouse?

Yes, but that does not change your tax situation. You gave $18,000 to your child. What your child does with the money is their choice. If your child then gives it to their spouse, that is a separate gift from your child, not from you.

What if I give someone money but they do not accept it?

A gift is complete when the recipient has full control of the money and knows about it. If someone refuses a gift or you take it back, it was never a completed gift. However, if you give money to someone's bank account or hand them cash, the gift is complete even if they later return it to you.

Does paying someone's tuition or medical bills count as a gift?

If you pay tuition or medical bills directly to the provider (the school or hospital), those payments do not count as gifts and do not use your annual exclusion. You can pay unlimited amounts this way. If you give money to the person and they pay the bills themselves, it counts as a gift.

What if I give money to a grandchild's 529 college savings plan?

Contributions to a 529 plan count as gifts and use your annual exclusion. However, 529 plans have a special rule: you can give up to five years' worth of the annual exclusion in one year ($90,000 per person in 2024 if you are married and both spouses do this) without filing, as long as you do not give that person any other gifts that year.