The annual exclusion lets you give up to $18,000 per person in 2024 without filing a gift tax return

The federal government allows you to give money to other people without triggering gift tax, up to a limit that changes each year. For 2024, you can give $18,000 to each person you choose without reporting it to the IRS. This is called the annual exclusion. If you give more than $18,000 to one person in a single calendar year, you must file a gift tax return — though you may not owe tax.

The annual exclusion applies per recipient, not per gift. You could give $18,000 to your child, $18,000 to your sibling, and $18,000 to a friend all in the same year, and none of it counts against your limit. The key is that each gift goes to a different person.

Married couples can combine their exclusions. If you are married, you and your spouse together can give $36,000 to one person in 2024 without filing a return. This is called gift splitting, and both spouses must agree to it.

Key Takeaways

  • You can give $18,000 per person per year (in 2024) without filing a gift tax return with the IRS.
  • The annual exclusion resets on January 1 each year and increases periodically to account for inflation.
  • Gifts to spouses who are U.S. citizens and gifts to political organizations have no limit and never require a return.
  • If you give more than the annual exclusion to one person, you file a return but may owe no tax if you have not used your lifetime exemption.
  • The annual exclusion is separate from your lifetime gift and estate tax exemption, which is much larger.

What counts as a taxable gift

Not every transfer of money or property counts as a gift for tax purposes. The IRS looks at whether you received something of value in return. If you sold your car to your child for fair market value, that is a sale, not a gift. If you gave the same car to your child for nothing, that is a gift.

Payments for someone else's tuition or medical bills do not count as gifts if you pay the provider directly. You can pay your grandchild's college tuition to the university, or your parent's hospital bill to the hospital, with no limit and no return required. But if you give money to your grandchild and they use it for tuition, that counts as a gift and uses your annual exclusion.

Loans are not gifts, even if you never expect to be repaid — but only if you document the loan in writing and charge at least the IRS minimum interest rate. Without a written agreement and interest, the IRS may treat a large "loan" as a gift.

How the annual exclusion changes year to year

The IRS adjusts the annual exclusion amount every year to account for inflation. It typically increases in increments of $1,000. In 2023, the exclusion was $17,000 per person. In 2024, it rose to $18,000. The IRS announces the new amount in October or November for the following year.

If you give more than the current year's exclusion to one person, you do not automatically owe tax. Instead, you file Form 709 (the gift tax return) and the excess amount counts against your lifetime exemption. The lifetime exemption is much larger — $13.61 million per person in 2024 — so most people never owe gift tax even if they exceed the annual exclusion.

Gifts to spouses and special cases with no limit

Gifts to a spouse who is a U.S. citizen have no annual limit and require no return. You can give your spouse any amount of money or property without triggering gift tax. If your spouse is not a U.S. citizen, the annual exclusion is higher ($185,000 in 2024) but still limited.

Gifts to political organizations, campaigns, and certain charitable groups also have no limit. You can donate any amount to a registered political committee or a may have access to charity without filing a gift tax return. The rules differ between political donations and charitable donations, so check the organization's status if you are unsure.

What happens if you exceed the annual exclusion

If you give more than $18,000 to one person in 2024, you must file Form 709 with your tax return for that year. Filing the return does not mean you owe tax — it means you are reporting the excess to the IRS and using part of your lifetime exemption.

Your lifetime exemption is the total amount you can give away (or leave in your estate) over your entire life before owing federal gift or estate tax. In 2024, that exemption is $13.61 million per person. Most people never reach that limit, so they file the return but owe no tax. The lifetime exemption is set to drop to roughly $7 million per person in 2026 unless Congress changes the law.

If you are married and your spouse also gives gifts, each spouse has their own lifetime exemption. Gifts do not automatically combine between spouses unless you file a joint return and elect gift splitting.

State gift taxes and other considerations

The federal government is not the only body that taxes gifts. A few states — Connecticut, Delaware, Illinois, Louisiana, Mississippi, North Carolina, and Tennessee — have their own gift taxes. The rules and limits vary by state. If you live in one of these states or give to someone who does, check your state's tax agency for the rules that apply to you.

Some states have estate taxes that work differently from the federal system. An estate tax applies to what you leave behind when you die, not to gifts you make while living. If your state has an estate tax, large gifts during your lifetime may not reduce your state estate tax bill the way they reduce your federal one.

Frequently Asked Questions

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

No. Gifts under the annual exclusion ($18,000 in 2024) do not require a return. You only file Form 709 if you give more than the exclusion to one person in a single year, or if you are gift splitting with a spouse.

What if I give someone $20,000 in one year?

You file Form 709 to report the $2,000 overage. That $2,000 counts against your $13.61 million lifetime exemption. You owe no federal tax unless you have already used up your entire lifetime exemption, which is rare.

Can I split a gift with my spouse if we are not married?

No. Gift splitting is only available to married couples. Unmarried partners each have their own $18,000 annual exclusion per recipient, but they cannot combine their exclusions.

Does paying someone's medical bill count as a gift?

Only if you give money to the person. If you pay the hospital or doctor directly for their care, it does not count as a gift and has no limit. If you give money to the person and they use it for medical bills, it counts as a gift and uses your annual exclusion.

What if I give someone money and they give it back later?

A gift is a one-way transfer with no expectation of return. If you expect repayment, it is a loan, not a gift. Document loans in writing and charge interest at the IRS minimum rate, or the IRS may treat it as a gift anyway.