Gift tax is a federal tax on money or property you give to another person

The federal government taxes large gifts, but the rules are more forgiving than most people think. You do not pay tax on most gifts you make during your lifetime. The IRS only taxes gifts that exceed an annual limit, and even then, only if you do not file the right form. The limit changes each year — it was $18,000 per person in 2024 and $19,000 in 2025 — but gifts below that amount require no tax and no paperwork.

The person receiving the gift never pays tax on it. The person giving the gift is responsible for any tax owed, and only when the gift is large enough to trigger the tax. Most people never hit that threshold in a single year, and those who do can often avoid paying tax through a lifetime exemption that lets you give away much larger amounts over your lifetime without owing anything.

Key Takeaways

  • Gifts under $19,000 per person per year (in 2025) are not taxed and require no IRS form.
  • The person giving the gift is responsible for any tax, not the person receiving it.
  • You can give away $13.61 million over your lifetime before owing federal gift tax, though this amount changes yearly and may decrease in 2026.
  • Gifts to spouses with U.S. citizenship, to charities, and to pay someone's medical bills or tuition directly do not count toward the gift tax limit.
  • If you give more than the annual limit to one person, you file Form 709 with the IRS, but you usually do not owe tax unless you have already used your lifetime exemption.

The annual gift limit and what it covers

Each year, you can give up to a set amount to each person without any tax consequence. In 2025, that amount is $19,000 per recipient. This means you could give $19,000 to your child, $19,000 to your grandchild, $19,000 to a friend, and $19,000 to another friend — all in the same year — and owe no tax on any of it.

The limit applies to gifts of cash, real estate, vehicles, investments, or anything else of value. It does not matter whether the gift is given all at once or spread across the year. If you give someone $10,000 in January and $9,000 in December, that counts as $19,000 total to that person for the year. The limit resets on January 1 each year.

Gifts that do not count toward the limit include tuition you pay directly to a school, medical expenses you pay directly to a provider, gifts to your spouse (if your spouse is a U.S. citizen), and gifts to registered charities. You can pay someone's college tuition or hospital bill without any limit, as long as you pay the institution directly rather than giving the money to the person.

Your lifetime exemption and how it works

Even if you give more than $19,000 to one person in a year, you usually do not owe tax immediately. The IRS allows you to give away a much larger amount over your entire lifetime before you owe any federal gift tax. In 2025, that lifetime limit is $13.61 million per person. This means you could give away $13.61 million total across all gifts, all recipients, and all years before owing a single dollar in tax.

When you give a gift larger than the annual limit, you file Form 709 with the IRS. This form tells the IRS about the large gift and counts it against your lifetime exemption. You do not send money with the form — you are just reporting the gift. The IRS subtracts that amount from your $13.61 million lifetime total. Once you have used up your entire lifetime exemption, gifts above the annual limit are taxed at 40 percent.

The lifetime exemption is set to decrease significantly in 2026 unless Congress acts. Current law would lower it to roughly $7 million per person. This is important if you are planning large gifts in the next year or two, because the rules may change.

When you have to file Form 709

You file Form 709 (the gift tax return) when you give more than $19,000 to a single person in a calendar year. You file it with your regular income tax return by April 15 of the following year. For example, if you gave your daughter $25,000 in 2024, you would file Form 709 with your 2024 tax return by April 15, 2025.

Filing the form does not mean you owe tax. It simply reports the gift to the IRS and counts it against your lifetime exemption. Most people who file Form 709 owe no tax because they have not used up their $13.61 million lifetime limit. The form is a reporting requirement, not a bill.

You do not file Form 709 for gifts under the annual limit, even if you give to many people. You also do not file it for gifts to your spouse, for direct tuition or medical payments, or for gifts to charities.

Gifts that are never taxed

Certain gifts are completely exempt from gift tax no matter how large they are. Gifts to your spouse (if your spouse is a U.S. citizen) are unlimited and never taxed. You could give your spouse $1 million, $10 million, or more, and there is no tax and no form to file.

Gifts to registered charities are also unlimited and never taxed. If you donate $100,000 to a nonprofit, that is not a taxable gift. You may be able to deduct it on your income tax return as a charitable contribution, which is a separate benefit.

If you pay someone's tuition directly to their school or their medical bills directly to their provider, those payments do not count as gifts and are never taxed, no matter the amount. You must pay the institution directly — if you give the money to the person and they pay the school, it counts as a regular gift subject to the limits.

How gift tax is calculated if you owe it

Gift tax is calculated at a flat rate of 40 percent on the amount of gifts that exceed both your annual limit and your lifetime exemption. This is a high rate, but it applies only to people who have given away more than $13.61 million in their lifetime (or will have by the end of 2025).

Here is an example: suppose you have already given away $13.61 million over your lifetime and used your entire exemption. In 2025, you give your child $25,000. The first $19,000 is covered by the annual limit and is not taxed. The remaining $6,000 exceeds the annual limit and your lifetime exemption is exhausted, so you owe 40 percent of $6,000, which is $2,400. You would report this on Form 709 and pay the tax with your tax return.

For most households, this scenario never happens. The lifetime exemption is so large that only people with substantial wealth ever use it up. If you are unsure whether you are close to your limit, a tax professional can review your gift history.

State gift tax and other considerations

A few states have their own gift tax in addition to the federal tax. Connecticut, Delaware, Louisiana, North Carolina, and Tennessee have had gift taxes in the past, but as of 2025, only Connecticut and Delaware currently tax gifts at the state level. If you live in one of these states, you may owe state gift tax on top of federal tax, even on gifts below the federal limit. Check your state's tax authority website for current rules.

If you are married and file taxes jointly, you and your spouse each have your own $19,000 annual limit and your own $13.61 million lifetime exemption. This means a married couple can give $38,000 per person per year without tax. You can also "split" a gift — if one spouse gives a large gift, the other spouse can agree to split it for tax purposes, which effectively doubles the limit.

Frequently Asked Questions

Does the person who receives a gift have to pay tax on it?

No. The recipient never pays tax on a gift. Only the person giving the gift is responsible for any tax owed, and only when the gift exceeds the annual and lifetime limits. In most cases, no tax is owed at all.

What if I give someone money and they say it is a loan, not a gift?

If it is truly a loan, it is not a gift and gift tax does not apply. However, the IRS requires that loans have a written agreement, a set repayment schedule, and an interest rate at least as high as the IRS minimum (which changes monthly). Without these elements, the IRS may treat it as a gift regardless of what you call it.

Can I give away $19,000 to multiple people in the same year without owing tax?

Yes. The $19,000 annual limit applies to each person you give to, not to your total giving. You could give $19,000 to ten different people in one year and owe no tax on any of it.

What happens to my lifetime exemption if I do not use it?

Your lifetime exemption does not expire or disappear if you do not use it. It stays available to you throughout your life. If you give away $5 million during your lifetime, you still have $8.61 million of exemption left to use. The exemption is set to decrease in 2026 unless Congress changes the law, so the amount available may shrink, but unused exemption does not vanish year to year.

Do I have to report gifts to the IRS if they are under the annual limit?

No. Gifts under $19,000 per person per year require no form and no report to the IRS. You only file Form 709 when a gift to one person exceeds the annual limit in a single year.