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

The annual gift tax exclusion is the amount you can give to another person each calendar year without triggering a gift tax return to the IRS. For 2024, that amount is $18,000 per recipient. If you give more than $18,000 to one person in a single year, you must file Form 709 (Gift Tax Return) with the IRS, even if you do not owe any tax.

The exclusion applies to each person you give to separately. You can give $18,000 to your daughter, $18,000 to your son, $18,000 to your friend, and $18,000 to your niece in the same year without filing. The limit resets on January 1 each year.

This exclusion has increased over time and is adjusted annually for inflation. The IRS rounds the new amount to the nearest $1,000. In 2023 it was $17,000; in 2024 it is $18,000. Check the IRS website each January to confirm the current year's amount.

Key Takeaways

  • You can give $18,000 per person per calendar year (2024) without filing a gift tax return, and this amount increases with inflation each year.
  • If you give more than $18,000 to one person in a year, you must file Form 709 even if no tax is owed, and the excess counts against your lifetime exemption.
  • Married couples can combine their exclusions, allowing $36,000 per recipient per year if both spouses consent to split the gift.
  • Gifts to spouses and to charities are unlimited and do not count against your exclusion or lifetime exemption.
  • Filing a gift tax return does not mean you pay tax immediately; it documents the gift and reduces your lifetime exemption amount.

What happens when you exceed the annual exclusion

If you give more than $18,000 to one person in a calendar year, the excess amount does not disappear. Instead, it counts against your lifetime gift and estate tax exemption. The lifetime exemption for 2024 is $13.61 million per person. When you file Form 709 to report the overage, you are essentially documenting that you have used part of your lifetime exemption.

For most people, this is not an immediate problem. You do not pay tax on the excess gift right away. The tax only applies if your total gifts and estate at death exceed the lifetime exemption amount. Because the exemption is so high, many people will never owe gift tax in their lifetime.

However, the lifetime exemption is set to drop significantly after 2025. Unless Congress acts, it will fall to roughly $7 million per person in 2026. If you plan to give large amounts, the timing of when you file and use your exemption matters.

How married couples can double their giving power

If you are married, you and your spouse can each use your own annual exclusion. This means you can give $36,000 per recipient per year (2024) without filing a return—$18,000 from each spouse. This is called gift splitting.

To use gift splitting, both spouses must consent. If only one spouse gives the money but you want to split it, you must file Form 709 together to elect gift splitting, even if the total is under $18,000 per person. Once you elect gift splitting on Form 709, it applies to all gifts that year unless you revoke it.

Gift splitting is useful when one spouse has significantly more money than the other, or when you want to move assets out of one spouse's estate for estate planning reasons. The mechanics are straightforward on the tax form, but the decision to split should be made with a tax professional if your situation is complex.

Gifts that do not count against your exclusion

Certain gifts are unlimited and never count against your annual exclusion or lifetime exemption. The most common are gifts to your spouse (if your spouse is a U.S. citizen) and gifts to registered charities. You can give your spouse any amount of money or property without filing a return or using any of your exemption.

Gifts that pay someone's tuition or medical expenses directly to the school or provider also do not count, as long as you pay the institution directly and not the person. If you give your grandchild $50,000 to pay for college tuition, and you send the check to the university, that gift does not count. If you give the $50,000 to your grandchild and they pay the tuition, it does count.

Gifts of future interests—such as the right to use a vacation home starting in five years—are also treated differently and may not may have access to for the annual exclusion. These situations are complex and warrant a conversation with a tax professional before you structure the gift.

How to report gifts over the limit

If you give more than $18,000 to one person in 2024, you file Form 709 (Gift Tax Return) with your federal tax return by April 15 of the following year. You list each gift, the recipient, the date, and the value. The form itself is straightforward, but valuing the gift correctly is important—undervaluing it can trigger an audit.

Filing Form 709 does not mean you owe tax that year. It simply documents the gift and notifies the IRS that you have used part of your lifetime exemption. You attach the form to your Form 1040 (individual income tax return) and send it to the IRS.

If you are married and using gift splitting, both spouses sign Form 709 and file it together. If only one spouse made gifts, only that spouse files, but the form must indicate that the other spouse consents to splitting.

State gift taxes and other considerations

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

Gift tax is separate from income tax. When you receive a gift, you do not report it as income on your tax return, and the giver does not deduct it. The gift tax is paid by the giver, not the recipient, and only applies if the giver exceeds their exclusion or exemption.

If you are giving assets that have increased in value—such as stock or real estate—the recipient receives what is called a stepped-up basis at the time of the gift. This can have significant tax consequences for capital gains if the recipient later sells the asset. This is another reason to consult a tax professional before making large gifts.

Planning ahead for large gifts

If you want to give away a large amount of money or property, timing and structure matter. You can spread gifts over multiple years to stay within the annual exclusion each year. You can also use other strategies, such as setting up a trust, making loans instead of gifts, or using your lifetime exemption strategically before it drops in 2026.

The rules around gifts interact with estate planning, income tax, and state law. If you are planning to give away more than a few hundred thousand dollars, or if you are giving property rather than cash, a conversation with a tax professional or estate planning attorney is worth the cost. They can help you structure the gift in a way that minimizes tax and achieves your goals.

Frequently Asked Questions

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

No. If you give $18,000 or less to one person in a calendar year, you do not file a gift tax return. The gift is not reported to the IRS. You only file Form 709 if you exceed $18,000 to a single recipient in one year.

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

You must file Form 709 to report the $20,000 gift. The first $18,000 uses your annual exclusion. The remaining $2,000 counts against your $13.61 million lifetime exemption. You do not owe tax that year, but the $2,000 is documented and reduces your lifetime exemption.

Can I give my child money for a down payment on a house without reporting it?

Yes, as long as it is $18,000 or less per calendar year. If you give $25,000, you file Form 709 for the $7,000 overage. The money itself is not taxable to your child; the reporting requirement is only for amounts over the annual exclusion.

Does my spouse have to agree to gift splitting?

Yes. Both spouses must consent to split gifts. If you want to use gift splitting, you both sign Form 709 and file it together. If your spouse does not consent, you cannot split the gift, and any amount over $18,000 counts against your individual lifetime exemption.

What is the difference between a gift and a loan?

A gift is money or property you give with no expectation of repayment. A loan is money you expect to be repaid, ideally with a written agreement and interest. If you call it a loan but never expect repayment, the IRS may treat it as a gift. If you charge interest below the IRS minimum rate, the difference may be treated as a gift.