The annual gift tax exclusion lets you give money or property to other people without filing a gift tax return

In 2024, you can give up to $18,000 per person per year without triggering any gift tax reporting requirement. This amount is called the annual exclusion. If you give more than this to any one person in a single year, you must file Form 709 (Gift Tax Return) with the IRS, even if you do not owe tax.

The annual exclusion amount changes most years. The IRS adjusts it for inflation in $1,000 increments. For 2023 it was $17,000; for 2024 it is $18,000. You can check the IRS website each January to see the current year's amount.

If you are married, you and your spouse can each give $18,000 to the same person in the same year, for a combined total of $36,000, without either of you filing a return. This is called gift splitting, and both spouses must agree to it.

Key Takeaways

  • You can give $18,000 per person per year in 2024 without filing Form 709, and this amount increases most years with inflation.
  • Married couples can combine their exclusions to give $36,000 per person per year if they both consent to gift splitting.
  • Gifts above the annual exclusion require you to file Form 709, but you may not owe tax if you have not used your lifetime exemption.
  • Certain gifts never count toward the limit: tuition paid directly to a school, medical expenses paid directly to a provider, and gifts to your spouse.
  • The annual exclusion resets on January 1 each year, so a gift on December 31 and another on January 1 are treated as gifts in two separate years.

What happens if you give more than the annual exclusion

If you give more than $18,000 to one person in one year, you must file Form 709 with your tax return. Filing the form does not mean you owe tax. Instead, the excess amount is subtracted from your lifetime exemption.

Your lifetime exemption is a separate pool of money you can give away over your entire life without owing federal gift tax. In 2024, your lifetime exemption is $13.61 million. Most people never reach this limit. When you file Form 709 for a gift over the annual exclusion, you are using up part of your lifetime exemption, but you still do not owe tax unless you have already given away more than $13.61 million in your lifetime.

The lifetime exemption amount also changes with inflation and is set by Congress. It was $12.92 million in 2023 and $13.61 million in 2024. These amounts are scheduled to drop to roughly $7 million per person on January 1, 2026, unless Congress changes the law.

Gifts that do not count toward either limit

Some gifts are completely excluded from gift tax rules and do not use up your annual exclusion or lifetime exemption. The most common ones are:

  • Tuition or medical expenses paid directly to the provider. If you pay a school or university directly for someone's tuition, or pay a hospital or doctor directly for medical care, that payment is not a gift for tax purposes. You can pay any amount this way. The payment must go directly to the institution, not to the person receiving the education or care.
  • Gifts to your spouse. You can give unlimited amounts to your spouse without any gift tax or reporting, as long as your spouse is a U.S. citizen. If your spouse is not a U.S. citizen, the annual exclusion is higher ($185,000 in 2024) but still limited.
  • Gifts to charities. Donations to may have access to charitable organizations are not subject to gift tax limits.
  • Gifts to political organizations. Contributions to political campaigns and certain political organizations are not subject to gift tax limits.

These exceptions are strict about the form the gift takes. If you give your child $50,000 and they use it to pay tuition, that is a taxable gift. If you pay the university $50,000 directly, it is not. The difference matters.

How the annual exclusion works across multiple people

The $18,000 annual exclusion applies per person per year. This means you can give $18,000 to your daughter, $18,000 to your son, $18,000 to your grandchild, and $18,000 to a friend all in the same year, and none of those gifts require you to file Form 709.

If you give $20,000 to your daughter and $20,000 to your son in the same year, you have exceeded the annual exclusion for each of them. You must file Form 709 for both gifts. The $2,000 overage for your daughter and the $2,000 overage for your son both count against your lifetime exemption.

The exclusion resets on January 1 each year. A gift on December 31, 2024, and another gift to the same person on January 1, 2025, are treated as gifts in two separate years. Each year's gift has its own $18,000 allowance.

Gift splitting for married couples

If you are married, you and your spouse can treat a gift as if you each gave half of it, even if only one of you actually gave the money. This is called gift splitting. Both spouses must agree to split the gift, and you must both file Form 709 if the gift exceeds the combined annual exclusion.

For example, suppose you give your daughter $36,000 in 2024. Without gift splitting, you have exceeded your annual exclusion by $18,000. With gift splitting and your spouse's consent, you are each treated as giving $18,000, which is exactly at the annual exclusion for each of you. Neither of you files Form 709.

Gift splitting does not change the tax outcome if you do exceed the combined exclusion — you still file Form 709 and use your lifetime exemption — but it can help you stay under the limit when you are giving to multiple people or larger amounts.

Loans versus gifts

If you lend money to someone instead of giving it, the loan is not subject to gift tax rules, but the IRS requires you to charge interest. The interest rate must be at least the Applicable Federal Rate (AFR), which the IRS publishes monthly. In late 2024, the AFR ranged from about 5% to 5.5% depending on the loan term.

If you lend money to a family member or friend and do not charge interest, or charge interest below the AFR, the IRS may treat the unpaid or below-market interest as a gift. You would then need to file Form 709 for the value of the interest you forgave.

A true loan also requires a written promissory note stating the amount, interest rate, and repayment schedule. Without documentation, the IRS may view the transaction as a gift instead of a loan.

State gift taxes

The federal gift tax is separate from state gift taxes. Most states do not have a gift tax, but a few do. Connecticut, Delaware, Louisiana, North Carolina, and Tennessee have inheritance or estate taxes that can affect large gifts, though the rules vary by state. Illinois previously had a gift tax but repealed it.

If you live in or give money to someone in a state with a gift or estate tax, you may need to file a state return in addition to the federal Form 709. State rules and exclusion amounts differ from federal rules, so check your state's tax authority website or speak with a tax professional if you are making large gifts and live in one of these states.

Frequently Asked Questions

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

No. Gifts under the annual exclusion do not require you to file Form 709. You can give $18,000 or less to as many people as you want in a year without any filing requirement. Keep records of large gifts in case the IRS asks questions later, but reporting is not required.

What if I give someone $20,000 — do I owe tax?

You do not owe tax, but you must file Form 709. The $2,000 over the annual exclusion counts against your $13.61 million lifetime exemption. Since most people never reach the lifetime limit, you will not owe tax unless you have already given away more than $13.61 million in your lifetime.

Can I give my child money for a down payment on a house?

Yes. A gift for a down payment counts as a regular gift and is subject to the annual exclusion. If you give your child $25,000 for a down payment in 2024, you must file Form 709 for the $7,000 overage. The money does not have to be used for the down payment — once you give it, your child can use it however they want.

Does paying someone's credit card bill count as a gift?

Yes, if you pay their credit card bill directly or give them money knowing they will use it to pay the bill, it is a gift. It counts toward the annual exclusion. The exception is if you pay a medical provider or school directly — those payments are not gifts even if they cover someone else's debt to that provider.

What if my spouse and I disagree about gift splitting?

Gift splitting requires both spouses to agree. If you do not agree, you cannot split the gift. Each spouse is responsible only for the gifts they actually made. If you give $36,000 and your spouse does not consent to split it, you have exceeded your annual exclusion by $18,000 and must file Form 709.