The annual gift tax exclusion lets you give money or property to other people without filing a gift tax return, as long as you stay under the limit

For 2024, you can give up to $18,000 per person per year without triggering gift tax reporting requirements. This amount, called the annual exclusion, resets on January 1 each year. If you give more than $18,000 to a single person in one calendar year, you must file Form 709 (the gift tax return) with the IRS, even if you do not owe tax.

The annual exclusion amount changes most years based on inflation. The IRS announces the new limit in late October for the following year. In 2023 it was $17,000; in 2024 it is $18,000. You can find the current year's limit on the IRS website under "Exclusions".

If you are married, you and your spouse can each give $18,000 to the same person in the same year, for a combined $36,000, without either of you filing a return. This is called gift splitting, and both spouses must agree to it on Form 709 if either one gave more than their individual limit.

Key Takeaways

  • You can give $18,000 per person per calendar year (2024) without filing a gift tax return, and this limit resets January 1.
  • If you give more than $18,000 to one person in a year, you must file Form 709 even if no tax is owed.
  • Married couples can each give $18,000 to the same person for a combined $36,000 per year without filing.
  • Gifts to spouses with U.S. citizenship and gifts to charities have no annual limit and never trigger gift tax.
  • Amounts over the annual limit count against your lifetime gift and estate tax exemption, which is $13.61 million per person in 2024.

Gifts that do not count toward the annual limit

Certain gifts are never subject to gift tax, no matter the amount. Gifts to a spouse (if your spouse is a U.S. citizen) have no limit. You can give your spouse $1 million, $10 million, or any amount, and it does not count against your annual exclusion or your lifetime exemption.

Gifts to may have access to charities — organizations the IRS recognizes as tax-exempt — also have no limit. Donations to churches, nonprofits, educational institutions, and other 501(c)(3) organizations do not trigger gift tax reporting.

Direct payments for someone else's medical or education expenses are also unlimited. If you pay a hospital, doctor's office, or university directly on behalf of another person, that payment does not count as a gift and does not use your annual exclusion. The payment must go straight to the provider, not to the person receiving care or education. If you give money to the person and they pay the bill, it counts as a regular gift.

What happens if you give more than the annual limit

If you give more than $18,000 to one person in 2024, you file Form 709 with your tax return. Filing the form does not mean you owe gift tax when ready. Instead, the excess amount counts against your lifetime gift and estate tax exemption.

For 2024, your lifetime exemption is $13.61 million. This means you can give away (or leave at death) up to $13.61 million total across your entire life before owing federal gift or estate tax. Every dollar you give over the annual limit reduces this lifetime pool. If you give $25,000 to one person in 2024, the extra $7,000 counts against your $13.61 million exemption, leaving you $13.603 million.

The lifetime exemption amount changes every year and is set to drop significantly in 2026 unless Congress acts. In 2026, it is scheduled to fall to roughly $7 million per person (adjusted for inflation). This means gifts you make now that use your exemption will not be "refunded" if the exemption shrinks.

Gifts to minors and trusts

Gifts to children or grandchildren under age 18 follow the same $18,000 annual limit as gifts to adults. However, there are special rules if you want to give a larger amount to a minor while still avoiding gift tax.

A 2503(c) trust (named after the tax code section) lets you give more than the annual limit to a minor without filing a gift tax return, as long as the trust is set up correctly. Money in the trust must be available to the child by age 21. This is a specialized tool and requires working with an attorney or tax professional to set up properly.

A Uniform Transfers to Minors Act (UTMA) account or Uniform Gifts to Minors Act (UGMA) account is simpler. You can give up to the annual limit per year to a custodial account for a minor without filing. These accounts are offered by most brokerages and do not require a lawyer to open.

Reporting gifts on your tax return

If you gave more than $18,000 to any one person during 2024, you file Form 709 (United States Gift (and Generation-Skipping Transfer) Tax Return) with your 2024 tax return. You file it even if you do not owe tax — the form straightforward reports the gift and reduces your lifetime exemption.

Form 709 asks for the date of the gift, the recipient's name and address, a description of what was given, and the value of the gift. If you are married and your spouse agrees to split the gift, both of you sign the form.

You do not file Form 709 for gifts under the annual limit, gifts to spouses, gifts to charities, or direct payments to medical and education providers. You also do not file if you gave multiple gifts to the same person that added up to $18,000 or less in the year.

How the IRS values gifts

For cash gifts, the value is straightforward — $5,000 given is a $5,000 gift. For property, vehicles, or investments, you use the fair market value on the date you gave it. Fair market value is what a willing buyer would pay a willing seller, neither under pressure.

If you give stock, use the closing price on the date of the gift. If you give real estate, you may need a professional appraisal. If you give a car, you can use the Kelley Blue Book value for that make, model, and condition on the date of transfer.

If you are unsure of the value, you can have a professional appraisal done. The appraiser's report becomes part of Form 709 if you file it. Undervaluing gifts to avoid reporting is considered tax fraud and can result in penalties and interest.

State gift tax

Most states do not have a gift tax. However, Connecticut, Delaware, Louisiana, Mississippi, North Carolina, and Tennessee have had gift taxes in the past, though most have repealed them or do not actively enforce them. Check your state's tax authority website to confirm whether your state taxes gifts.

Even if your state has no gift tax, you still follow federal rules. Federal gift tax is separate from state income tax and applies regardless of where you live.

Frequently Asked Questions

Can I give $18,000 to multiple people without filing?

Yes. The $18,000 limit applies per person per year. You can give $18,000 to your daughter, $18,000 to your son, $18,000 to your sister, and $18,000 to a friend in the same year without filing a return. Only gifts over $18,000 to the same person in the same year require Form 709.

Does a gift of stock count differently than a gift of cash?

No. Both count toward your annual limit based on fair market value. If you give stock worth $25,000, the entire $25,000 counts as a gift, and the $7,000 over the limit requires Form 709. The cost basis of the stock does not matter for gift tax purposes.

What if I give someone money and they use it to pay for medical bills?

That counts as a regular gift and uses your annual exclusion. To avoid gift tax, you must pay the medical provider directly yourself. If you give the person cash and they pay the bill, the IRS sees it as a gift of money, not a payment for medical expenses.

Do I owe gift tax if I file Form 709?

Not necessarily. Filing Form 709 reports the gift and reduces your lifetime exemption, but you only owe tax if you have already used up your $13.61 million lifetime exemption. Most people never reach that threshold in their lifetime.

Can I split a gift with my spouse if we are not married?

No. Gift splitting is only available to married couples, and both spouses must agree to it on Form 709. Unmarried partners cannot split gifts, so each person has their own $18,000 annual limit.