The annual gift tax exclusion lets you give money or property to other people without filing a gift tax return or reducing your lifetime exemption

For 2024, you can give up to $18,000 per person per year without triggering gift tax paperwork. This amount is called the annual exclusion. If you give more than $18,000 to one person in a single year, you must file Form 709 (the gift tax return) with the IRS, even if you do not owe tax.

The annual exclusion amount changes most years. The IRS adjusts it for inflation in $1,000 increments. For 2023 it was $17,000; for 2024 it is $18,000. Check the IRS website or a tax professional before giving large amounts to confirm the current year's limit.

Married couples can combine their exclusions. If you are married and file jointly, you and your spouse together can give $36,000 per person per year without filing a return. This is called gift splitting, and both spouses must agree to it on Form 709 if you use it.

Key Takeaways

  • You can give $18,000 per person per year (in 2024) without filing a gift tax return or owing tax.
  • Gifts to spouses and to charities do not count toward the annual exclusion and have no limit.
  • If you give more than the annual exclusion to one person, you file Form 709 but usually do not owe tax — the overage counts against your lifetime exemption instead.
  • Married couples can give twice the annual exclusion per person if both spouses agree to split gifts on Form 709.
  • The annual exclusion amount changes each year; the IRS publishes the current limit in January.

Gifts that do not count toward the annual exclusion

Some gifts are unlimited and never trigger gift tax, no matter the amount. Gifts to your spouse (if your spouse is a U.S. citizen) have no limit. Gifts to charities that are registered with the IRS have no limit. Medical expenses and tuition paid directly to the provider on someone else's behalf also do not count — you can pay a hospital or university directly without limit, as long as you pay the provider, not the person.

Gifts of future interest (like a promise to give money later, or a gift that the person cannot use right now) do not may have access to for the annual exclusion. Only gifts of present interest — money or property the person can use or enjoy immediately — count toward the $18,000 limit.

What happens if you give more than the annual exclusion

If you give $25,000 to one person in 2024, the first $18,000 is covered by the annual exclusion. The remaining $7,000 counts against your lifetime exemption, which is separate from the annual exclusion. For 2024, your lifetime exemption is $13.61 million. You do not owe tax on the $7,000 overage; instead, it reduces the amount you can pass on tax-free when you die.

You must file Form 709 to report the overage, even though you do not owe tax. File it with your tax return by April 15 of the following year. If you do not file, the IRS may not know you made the gift, and you could lose the lifetime exemption protection for that amount.

Most people never use their full lifetime exemption during their lifetime or at death, so exceeding the annual exclusion is often not a practical concern. But filing Form 709 keeps the IRS record clear and protects you if your estate is large.

How the lifetime exemption works

Your lifetime exemption is a pool of money you can give away or leave to heirs without owing federal gift or estate tax. In 2024, that pool is $13.61 million per person. Every time you give a gift that exceeds the annual exclusion, you use part of that pool. When you die, any remaining pool shields your heirs from estate tax.

The lifetime exemption amount is set by law and changes when Congress acts. In 2026, it is scheduled to drop to roughly $7 million per person (adjusted for inflation), unless Congress extends the current law. This is important if you are planning large gifts or have a substantial estate — the rules may change.

Reporting gifts on your tax return

If all your gifts in a year stay within the annual exclusion for each person, you do not file anything. No form, no return. The IRS does not need to know.

If you exceed the annual exclusion to any person, file Form 709 (United States Gift (and Generation-Skipping Transfer) Tax Return) with your federal income tax return. You can file it on paper or electronically through tax software. The form asks for the donor's name, the recipient's name and address, the date of the gift, the value of the gift, and how much of your lifetime exemption you are using.

If you are married and want to split gifts with your spouse, both of you must sign Form 709 and file it, even if only one spouse made the gift. Gift splitting is optional — you can choose not to split if it is not advantageous.

Valuing gifts for tax purposes

The value of a gift is usually its fair market value on the date you give it. For cash, that is the amount. For property, stocks, or real estate, fair market value is what a willing buyer would pay a willing seller on that date, neither under pressure to buy or sell.

If you give property that is hard to value — artwork, a business interest, rental real estate — you may need a professional appraisal. The IRS can challenge your valuation if it seems too low, so keep documentation of how you arrived at the value. For stocks and bonds, use the closing price on the date of the gift. For real estate, a real estate appraiser can provide a formal valuation.

State gift tax

Most states do not have a gift tax. A few states — Connecticut, Delaware, Louisiana, North Carolina, and Tennessee — have or had gift taxes, but most have repealed them or do not enforce them actively. Check your state's tax authority website if you live in one of these states or are giving to someone who does.

Federal gift tax is separate from state tax. Even if your state has no gift tax, you may owe federal gift tax if you exceed the federal annual exclusion and lifetime exemption. Conversely, if your state has a gift tax, you may owe both state and federal tax on the same gift.

Frequently Asked Questions

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

No. Gifts that stay within the annual exclusion per person do not require a tax return or any filing. The IRS does not need to know about them. You only file Form 709 if you exceed the annual exclusion to any person in that year.

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

Yes. The $18,000 limit is per person per year. You can give $18,000 to your child, $18,000 to your grandchild, $18,000 to a friend, and so on, all in the same year, without filing a return. Only when you exceed $18,000 to a single person do you need to file.

What if I give someone $20,000 one year and $16,000 the next year?

Each year is separate. In year one, you exceed the annual exclusion by $2,000 and must file Form 709. In year two, you stay within the $18,000 limit and do not file. The $2,000 overage from year one counts against your lifetime exemption, not carried forward to year two.

Do gifts to my spouse count toward the annual exclusion?

No. Gifts to a spouse who is a U.S. citizen are unlimited and never count toward the annual exclusion or lifetime exemption. You can give your spouse any amount without filing a return or owing tax.

If I file Form 709, do I owe tax?

Usually not. Filing Form 709 reports the gift and uses part of your lifetime exemption, but you do not owe tax unless you have already used up your entire lifetime exemption. For most people, the lifetime exemption is large enough that filing Form 709 is just a record-keeping step, not a tax bill.