The federal gift tax applies when you give money or property worth more than a certain amount to another person in a single year

The annual gift tax exclusion for 2024 is $18,000 per person. This means you can give up to $18,000 to as many people as you want in a calendar year without filing a gift tax return or owing any tax. If you give more than $18,000 to one person in a year, you must file a Form 709 (Gift Tax Return) with the IRS, even if you do not owe tax.

The exclusion amount changes most years based on inflation. The IRS announces the new limit in October for the following year. Married couples can combine their exclusions, so a married couple can give $36,000 to one person per year without filing.

Gifts that exceed the annual exclusion do not automatically trigger a tax bill. Instead, they count against your lifetime gift and estate tax exemption, which is $13.61 million per person in 2024. Once you exceed that lifetime total, you owe a 40 percent tax on the excess. Most people never reach this threshold.

Key Takeaways

  • You can give $18,000 per person per year (2024) without filing a gift tax return or owing tax.
  • Married couples can give $36,000 per person per year by combining their exclusions.
  • Gifts over the annual exclusion must be reported on Form 709, but they do not create a tax bill unless your lifetime gifts exceed $13.61 million.
  • Certain gifts are never taxed: direct payments to medical providers, tuition paid to schools, gifts to spouses, and gifts to charities.
  • The annual exclusion amount changes yearly with inflation and is announced by the IRS in October.

What counts as a gift for tax purposes

A gift is any transfer of money or property where you receive nothing of equal value in return. This includes cash, real estate, vehicles, investments, artwork, and jewelry. It also includes forgiving a loan — if you lend someone $50,000 and later say they do not have to repay it, the unpaid balance is treated as a gift.

Gifts to your spouse who is a U.S. citizen are never taxed, no matter the amount. Gifts to charities registered with the IRS are also never taxed. Direct payments to a medical provider or school on behalf of someone else do not count as taxable gifts, even if they exceed the annual exclusion — but the payment must go straight to the provider or school, not to the person receiving the care or education.

Transfers that look like gifts but are not: payments for goods or services at fair market value, loans with a written agreement and a reasonable interest rate, and inheritances (which are handled under estate tax rules, not gift tax rules).

When you must file Form 709

You file Form 709 (Gift Tax Return) when you give more than $18,000 to a single person in a calendar year. You file it with your federal income tax return for that year, due by April 15 of the following year (or October 15 if you file an extension).

Filing Form 709 does not mean you owe tax. It means you are reporting the gift and using part of your lifetime exemption. The IRS uses this form to track cumulative gifts over your lifetime. If you never exceed $13.61 million in total gifts, you will never owe gift tax.

If you are married and both spouses give gifts, each spouse files their own Form 709 if needed. Married couples can elect to "split" gifts — treating a gift from one spouse as if it came from both — which can help stay under the annual exclusion. This election is made on Form 709.

The lifetime exemption and how it works

The lifetime gift and estate tax exemption is a total pool of money you can give away during your life and at death without owing federal tax. For 2024, that amount is $13.61 million per person. Every gift over the annual exclusion ($18,000) counts against this pool.

Example: You give $50,000 to your child in 2024. The first $18,000 is covered by the annual exclusion. The remaining $32,000 counts against your lifetime exemption, leaving you with $13.578 million in remaining exemption. You file Form 709 to report this, but you owe no tax.

The lifetime exemption is set by federal law and changes when Congress acts. The current amount ($13.61 million in 2024) is scheduled to drop to roughly $7 million per person on January 1, 2026, unless Congress extends it. This is important to know if you are planning large gifts.

Gifts that are never taxed

Certain gifts fall outside the gift tax system entirely. Gifts to your spouse (if they are a U.S. citizen) are unlimited and never taxed. Gifts to charities registered as 501(c)(3) organizations are never taxed. Direct payments to medical providers for someone else's care do not count as gifts, even if they are large — but the payment must go to the provider, not to the patient. The same rule applies to tuition paid directly to a school.

Political contributions to candidates and parties are not subject to gift tax (though they may be subject to campaign finance limits). Gifts to your children under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) are taxed like any other gift, but the income they generate may be taxed at the child's rate rather than yours.

How gift tax interacts with estate tax

Gift tax and estate tax are connected through the lifetime exemption. Money you give away during your life counts against the same $13.61 million exemption that applies to your estate when you die. If you use $2 million of your exemption on gifts while living, your estate has $11.61 million left to pass tax-free.

This is why some people make large gifts late in life — to use their exemption while they can control who receives the money. However, gifts made within three years of death are pulled back into the estate for tax purposes in certain cases (gifts of life insurance policies, for example). Consult a tax professional or estate attorney before making very large gifts.

State gift taxes are separate from federal gift tax. A few states (Connecticut, Delaware, Illinois, Louisiana, North Carolina, and Tennessee) have their own estate taxes, but most do not have a separate gift tax. Check your state's rules if you live in one of these states.

Reporting gifts on your tax return

If you give gifts under the annual exclusion ($18,000 or less per person per year), you do not file anything with the IRS. You simply make the gift. No tax return, no form, no reporting required.

If you exceed the annual exclusion in a single year, you file Form 709 with your federal income tax return. You can file Form 709 even if you do not owe income tax. The form asks for the date of the gift, the recipient's name and address, a description of what was given, and its fair market value on the date of the gift.

If you are unsure of the value of a gift (for example, a piece of real estate or artwork), you may need to have it appraised. Keep records of how you determined the value in case the IRS questions it later.

Frequently Asked Questions

Do I owe gift tax if I give my child $25,000?

Not necessarily. You file Form 709 to report the gift, but you only owe tax if your lifetime gifts exceed $13.61 million. The $7,000 over the annual exclusion counts against your lifetime exemption. Most people never reach the lifetime limit, so no tax is due.

Can I split a gift with my spouse to avoid filing?

Yes. If you are married, you can elect gift splitting on Form 709. This treats a $36,000 gift from one spouse as a $18,000 gift from each spouse, keeping you under the annual exclusion. Both spouses must consent to the split, and you file Form 709 to make the election.

What if I give someone money and they pay me back later?

If there is a written loan agreement with a reasonable interest rate and a set repayment schedule, it is a loan, not a gift. The IRS publishes minimum interest rates (called Applicable Federal Rates) that loans must meet. Without a written agreement, the IRS may treat it as a gift.

Do I have to report gifts I receive?

No. The person giving the gift files Form 709 if required, not the person receiving it. You do not report gifts on your personal tax return. However, if a gift generates income (for example, a gift of stock that pays dividends), you report that income on your return.

What happens if I give more than my lifetime exemption?

You owe a 40 percent federal tax on the amount over $13.61 million. This is rare. The tax is calculated and paid when you file Form 709 or when your estate is settled. Very few people reach this threshold during their lifetime.