The gift tax is a federal tax on money or property you give to another person while you're alive

The IRS taxes large gifts the same way it taxes income — but only if the gift exceeds a yearly limit. That limit changes most years. For 2024, you can give up to $18,000 per person per year without filing any tax forms or owing tax. If you give more than that to one person in a single year, you report the overage on Form 709 when you file your taxes.

The tax itself doesn't come due when ready. Instead, large gifts reduce your lifetime exemption — a total amount you can give away (or leave in your will) before the federal government taxes any of it. That lifetime exemption is much larger than the yearly limit, which is why most people never pay gift tax even if they give away more than $18,000 in a year. You file the form to document the gift and reduce your exemption, but you usually don't write a check to the IRS.

Gifts to spouses have no limit at all, and gifts to charities don't count toward your limit. Gifts that pay someone's tuition or medical bills directly to the school or hospital also don't count, even if they're large.

Key Takeaways

  • You can give $18,000 per person per year (in 2024) without reporting it to the IRS or owing any tax.
  • Gifts above that yearly limit must be reported on Form 709, but you usually don't pay tax — the overage reduces your lifetime exemption instead.
  • Your lifetime exemption is currently over $13 million, so most people never actually pay gift tax even if they give away large amounts.
  • Gifts to your spouse, gifts to charities, and direct payments for someone's tuition or medical care don't count toward your limits at all.
  • The yearly limit and lifetime exemption change periodically, so the amounts that trigger reporting requirements shift every few years.

The yearly gift limit and how it works

Each calendar year, you can give up to a set amount to each person without any tax consequence. That amount is $18,000 for 2024. If you're married, your spouse can give the same amount separately, so a married couple can give $36,000 per person per year without filing anything.

The limit applies per recipient. You could give $18,000 to your daughter, $18,000 to your son, $18,000 to a friend, and $18,000 to a charity in the same year, and none of it would be taxable or require a form. But if you give $25,000 to your daughter in one year, you've exceeded the limit by $7,000.

When you exceed the limit, you don't pay tax on the overage when ready. Instead, you file Form 709 with your tax return and report the excess. That $7,000 comes out of your lifetime exemption. The IRS tracks it, and when you die, your estate uses the remaining exemption to shelter your inheritance from estate tax.

Your lifetime exemption and why it matters more than the yearly limit

The lifetime exemption is a total amount you can give away during your life and leave in your will before any federal gift or estate tax applies. For 2024, that exemption is over $13 million per person. A married couple has over $26 million combined.

Every gift that exceeds the yearly limit reduces your lifetime exemption by that amount. So if you give $25,000 to your daughter, the $7,000 overage reduces your exemption from $13 million to $12,993,000. You don't pay tax on that $7,000 — it just shrinks the pool of money you can eventually leave tax-free.

Because the lifetime exemption is so large, most people never pay gift tax. You'd have to give away millions of dollars over your lifetime to exhaust it. The yearly limit exists mainly to prevent people from avoiding estate tax by giving away their entire estate in the year before they die.

The lifetime exemption is set by Congress and changes periodically. It was much lower in past years and is scheduled to drop significantly after 2025 unless Congress acts. If you're planning large gifts, it's worth checking the current amount.

Gifts that don't count toward your limits

Certain gifts are completely excluded from the gift tax rules. Gifts to your spouse have no limit — you can give your spouse any amount of money or property without any tax or reporting requirement, as long as your spouse is a U.S. citizen.

Gifts to registered charities also don't count. You can give a charity $100,000 or $1 million and it won't reduce your yearly limit or lifetime exemption. You may be able to deduct the gift on your income tax return, depending on the type of charity and your tax situation.

Direct payments for someone's tuition or medical expenses are excluded too, but only if you pay the school or hospital directly. If you give your grandchild $30,000 and they use it to pay tuition, that counts as a regular gift. But if you write a check to the university for $30,000, it doesn't count toward your limit at all. The same rule applies to medical bills — pay the doctor or hospital directly, and it's excluded.

How to report gifts that exceed the yearly limit

If you give more than $18,000 to one person in a calendar year (or more than $36,000 if you're married and your spouse consents to split the gift), you report it on Form 709, the United States Gift Tax Return. You file this form with your federal income tax return for that year.

Form 709 asks for the donor's name, the recipient's name, the date of the gift, a description of what was given, and the value of the gift. You calculate how much of the gift exceeds the yearly limit and report that amount. The form also shows how much of your lifetime exemption you've used.

You don't send money with the form. You're straightforward documenting the gift so the IRS knows it happened and can track your lifetime exemption. If you never exceed your lifetime exemption, you'll never owe gift tax, but you still file the form to keep the record straight.

When you actually owe gift tax (and why it's rare)

You owe gift tax only when you've given away more than your lifetime exemption. Since that exemption is over $13 million, this happens almost never. Even wealthy people who give away millions during their lifetime usually don't pay gift tax because they stay under the exemption.

If you somehow did exceed your lifetime exemption, the tax rate would be 40% on the overage. So if you'd given away $14 million and your exemption was $13 million, you'd owe 40% of $1 million, or $400,000. But again, this is extraordinarily rare.

The lifetime exemption is scheduled to drop significantly after 2025 unless Congress changes the law. If that happens, more people might need to think about gift tax planning. But for now, the main reason to file Form 709 is to document gifts and keep your exemption tracking accurate, not because you expect to owe tax.

Frequently Asked Questions

Do I have to report gifts to family members?

Only if they exceed $18,000 per person per year. Gifts under that amount need no reporting. If you give your child $15,000, you don't file anything. If you give them $25,000, you file Form 709 to report the $7,000 overage, but you don't pay tax on it.

What if I give someone money and they give it back — does that count as a gift?

A true loan doesn't count as a gift. But the IRS looks at whether you actually intended to be repaid. If you lend money without a written agreement, without charging interest, and without expecting repayment, the IRS may treat it as a gift. To be safe, use a promissory note that spells out the loan terms.

Does my state have a gift tax?

Most states don't have a gift tax. A few states have an estate tax that applies when you die, but that's different from a gift tax. Check your state's tax website or speak with a tax professional in your state to be sure.

Can I give away $36,000 to one person if I'm married?

Yes, if you and your spouse agree to "split" the gift. You each use $18,000 of your yearly limit, so together you can give $36,000 to one person without exceeding either limit. You report this on Form 709 by checking the gift-splitting box.

What counts as the value of a gift?

For cash, it's the amount you gave. For property like stock or real estate, it's the fair market value on the date you gave it. If you're unsure of the value, you may need an appraisal. The IRS can challenge your valuation if it seems too low.