The annual gift tax exclusion lets you give up to a set dollar amount per person each year with no tax filing required

For 2024, you can give up to $18,000 per person per year without filing a gift tax return or reducing your lifetime exemption. This amount is called the annual exclusion. The IRS adjusts it every year for inflation, so the number changes — in 2023 it was $17,000, and in 2025 it will be $18,000 again (the IRS announced this in October 2024).

The key rule: the exclusion applies per recipient. You can 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 counts toward gift tax. But if you give one person $25,000 in a single year, the $7,000 over the limit does count.

Gifts that exceed the annual exclusion do not automatically trigger a tax bill. Instead, they reduce your lifetime gift and estate tax exemption — a separate pool of money you can give away over your lifetime before federal tax applies. For 2024, that lifetime exemption is $13.61 million per person. Most people never hit that ceiling.

Key Takeaways

  • You can give $18,000 per person per year in 2024 without filing a gift tax return, and this amount increases annually for inflation.
  • The annual exclusion applies separately to each recipient, so you can give $18,000 to multiple people in the same year.
  • Gifts over the annual exclusion reduce your lifetime exemption but do not create an when ready tax bill for most people.
  • Spouses can combine their exclusions, effectively doubling the amount a married couple can give to one person each year.
  • Certain gifts — to spouses, to charities, and for medical or education expenses paid directly to providers — are never subject to gift tax.

How the annual exclusion works in practice

The $18,000 limit applies to the giver, not the receiver. You decide how much to give and to whom. The recipient does not report the gift on their tax return and owes no income tax on it — gifts are never taxable income to the person who receives them.

The exclusion resets on January 1 each year. If you give someone $18,000 in December, you can give them another $18,000 in January of the next year. Gifts do not carry over — if you give only $10,000 to someone in a year, you cannot give them $26,000 the next year and stay under the limit.

When you give more than $18,000 to one person in a calendar year, you must file Form 709 (United States Gift Tax Return) with the IRS, even if you owe no tax. This form reports the excess amount and reduces your lifetime exemption. You file it by April 15 of the following year, the same important date as your income tax return.

Gifts that do not count against the annual exclusion

Some gifts are exempt from the annual exclusion entirely. The most common are:

  • Gifts to your spouse: You can give your spouse any amount, any time, with no limit or filing requirement. This is called the unlimited marital deduction.
  • Gifts to charities: Donations to may have access to charities are not subject to gift tax and may be deductible on your income tax return.
  • Medical expenses paid directly to a provider: If you pay a doctor, hospital, or dentist directly for someone else's care, that payment is not a gift and does not count toward the annual exclusion — even if the amount is very large.
  • Education expenses paid directly to a school: Tuition paid directly to an accredited school or university is not a gift, regardless of amount. Room, board, and books do not may have access to.

These exemptions exist because Congress wanted to encourage support for spouses, charitable giving, and access to medical and education services. The payment must go directly to the provider, not to the person receiving the service.

What happens when married couples give gifts

Married couples filing jointly can split gifts, which means they can combine their annual exclusions. If both spouses agree, they can give up to $36,000 per person per year ($18,000 from each spouse) without filing a return.

To use gift splitting, both spouses must consent, and you must file Form 709 even if the total is under $36,000 — the form itself documents that you are splitting the gift. You do not need your spouse's signature on the form, but you must indicate on your return that you are splitting, and your spouse should do the same on theirs.

Gift splitting applies only to gifts made during the marriage. If you divorce, you cannot split gifts made after the divorce is final, and gifts made before the divorce cannot be split retroactively.

Gifts over the annual exclusion and your lifetime exemption

When you give more than $18,000 to one person in a year, the excess reduces your lifetime gift and estate tax exemption. This is a cumulative limit on how much you can give away over your entire life before federal tax applies.

For 2024, your lifetime exemption is $13.61 million. If you give someone $25,000 in a year, the $7,000 over the annual exclusion counts against this $13.61 million pool. You would still owe no tax — you would straightforward have $13.61 million minus $7,000 = $13.603 million left to give away before tax applies.

The lifetime exemption is very high, and most people never exceed it. However, it is set to drop significantly after 2025. Unless Congress acts, the exemption will fall to roughly $7 million per person on January 1, 2026. This is why some people with substantial assets choose to make large gifts now, while the exemption is high.

How to report gifts on your taxes

If all your gifts in a year are under $18,000 per person, you do not file anything. The IRS does not require a return, and you do not report the gifts on your income tax return.

If you give more than $18,000 to one person in a calendar year, you file Form 709 with the IRS by April 15 of the next year. You can file it with your income tax return or separately. The form asks for the recipient's name, address, and relationship to you; the date and amount of each gift; and a description of what was given.

Married couples who split gifts must each file Form 709, even if the total is under $36,000. If you file late, the IRS may assess penalties, but filing the form itself does not create a tax bill — it straightforward documents the gift and reduces your lifetime exemption.

State gift taxes and other rules

The federal gift tax is separate from state taxes. Most states do not have a gift tax, but a few do: Connecticut, Delaware, Illinois, Louisiana, Mississippi, North Carolina, and Tennessee have or had gift taxes at various points, though some have phased them out or repealed them. Check your state's tax authority website to confirm whether your state taxes gifts.

Some states also have an inheritance tax, which is different from a gift tax. An inheritance tax is paid by the person who receives money or property after someone dies, not by the person giving gifts while alive. Nine states have inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and Tennessee (which also has a gift tax).

If you live in or give to someone in a state with a gift tax, you may need to file a state return in addition to the federal Form 709. State rules and exemptions vary widely, so contact your state's department of revenue or a tax professional for specifics.

Frequently Asked Questions

Do I have to report gifts to the IRS if they are under $18,000?

No. If all your gifts to one person in a calendar year are under $18,000, you do not file a return or report them to the IRS. The annual exclusion means these gifts are not tracked or reported.

Can I give someone $18,000 twice in one year?

No. The annual exclusion is per calendar year, not per transaction. If you give someone $18,000 in January and another $18,000 in December of the same year, the second gift exceeds the limit and you must file Form 709. The exclusion resets on January 1.

What if I give a gift and the recipient sells it later — do they owe tax?

The recipient does not owe tax on the gift itself. However, if they sell the item for a profit, they may owe capital gains tax on the profit. For example, if you give someone stock worth $18,000 and they sell it for $25,000, they owe tax on the $7,000 gain, not on the original $18,000 gift.

Does paying someone's mortgage or rent count as a gift?

Yes, if you pay it directly to the lender or landlord on their behalf. The payment is a gift and counts toward the annual exclusion. However, if you give the person cash and they choose to pay their mortgage, that is their decision and the gift is the cash, not the mortgage payment.

Can I give gifts to my grandchildren without triggering the generation-skipping transfer tax?

Gifts to grandchildren under the annual exclusion ($18,000 per person per year in 2024) do not trigger generation-skipping transfer tax. Gifts over the exclusion may be subject to this additional tax if they exceed your generation-skipping exemption, which is currently $13.61 million. Consult a tax professional if you plan large gifts to grandchildren.