Gifts are generally not tax deductible for the person giving them

If you give money or property to someone as a gift, you cannot deduct that gift on your federal income tax return. The IRS does not allow personal gifts to reduce your taxable income, whether you give $50 to a friend or $5,000 to a family member.

The only time gifts matter for taxes is if you give away so much in a single year that you trigger the gift tax — a separate tax on the giver, not the receiver. Most people never hit this threshold. The person who receives the gift pays no income tax on it either.

Key Takeaways

  • Personal gifts to individuals are never deductible on your income tax return, no matter the amount.
  • The gift tax applies only if you give more than $18,000 to one person in a single year (2024 limit; this amount changes annually).
  • Gifts to spouses, charities, and political organizations have different rules and may not trigger gift tax at all.
  • The person receiving a gift owes no income tax on it in any situation.

When the gift tax actually applies

The gift tax is a tax on you as the giver if you give away more than a certain amount in a single calendar year. For 2024, you can give up to $18,000 per person per year without triggering it. If you give $20,000 to your adult child in 2024, the $2,000 over the limit counts against your lifetime gift and estate tax exemption.

Most people have a lifetime exemption of $13.61 million (2024). This means you can give away that total amount over your lifetime before owing any gift tax at all. Because this exemption is so high, the gift tax rarely affects ordinary people making normal gifts to family and friends.

The annual limit ($18,000 in 2024) increases most years to account for inflation. If you give to multiple people, the limit applies separately to each person — you can give $18,000 to your child and $18,000 to your grandchild in the same year without any tax consequence.

Gifts to charities and political organizations

Donations to may have access to charities are tax deductible, but only if you itemize deductions on your tax return instead of taking the standard deduction. You must also have a receipt or written acknowledgment from the charity showing the amount you gave.

Gifts to political candidates, political parties, and political action committees (PACs) are not deductible. You can give to them, but you get no tax benefit for doing so.

Gifts to your spouse and ex-spouse

Gifts between spouses are never subject to gift tax, no matter how large. You can give your spouse $100,000 or $1 million with no tax consequence to either of you.

Gifts to an ex-spouse are treated differently. If the gift is part of a divorce settlement or alimony arrangement, it may not be subject to gift tax. If it is a personal gift after the divorce is final, the normal gift tax rules apply.

Gifts of property and investments

The gift tax applies to gifts of property, stocks, real estate, and other assets the same way it applies to cash. If you give your child stock worth $20,000, that counts as a $20,000 gift for tax purposes.

When someone receives a gift of property or investments, they inherit the original owner's cost basis for tax purposes. This matters if they later sell it. If you bought stock for $5,000 and it is now worth $20,000, and you give it to your child, your child's cost basis is $5,000. If they sell it for $25,000, they owe capital gains tax on the $20,000 gain, not the $15,000 difference between what they received and what they sold it for.

Loans versus gifts

If you lend money to someone instead of giving it as a gift, different rules apply. A loan must have a written agreement, a stated interest rate, and a repayment schedule to be treated as a loan for tax purposes. If you lend money to a family member at below-market interest rates, the IRS may treat part of it as a gift instead.

The IRS publishes minimum interest rates each month for family loans. If you lend money at a lower rate than the IRS minimum, the difference is treated as a gift and counts toward your annual gift limit.

Frequently Asked Questions

Do I have to report gifts I give to the IRS?

You only file a gift tax return (Form 709) if you give more than $18,000 to one person in a year (2024). Even then, you may not owe tax if you have not used up your lifetime exemption. Many people file the return simply to document the gift and preserve their exemption records.

What if someone gives me money — do I owe taxes on it?

No. The person receiving a gift owes no income tax on it. Only the giver might owe gift tax if the amount is very large, and even then, most people never reach that threshold.

Can I deduct gifts I give to family members on my taxes?

No. Personal gifts to family members are never deductible on your income tax return. The only exception is if you give to a may have access to charity, in which case you can deduct it if you itemize deductions.

Does the $18,000 annual limit reset each year?

Yes. The limit applies per calendar year. If you give $18,000 to someone in 2024, you can give another $18,000 to that same person in 2025 with no tax consequence. The limit also increases most years for inflation.