The federal gift tax exemption for 2024

You can give away $18,000 per person per year without filing a gift tax return or using any of your lifetime exemption. This is called the annual exclusion. If you give more than $18,000 to one person in a single year, you must file Form 709 with the IRS, even if you do not owe tax.

The $18,000 limit applies to each recipient separately. You could give $18,000 to your daughter, $18,000 to your son, and $18,000 to a friend in the same year without triggering any tax filing requirement. If you are married, your spouse can give the same amount to the same people, so a married couple can give $36,000 to one child without filing.

This annual exclusion amount changes most years. The IRS adjusts it for inflation in $1,000 increments. In 2023 it was $17,000. In 2025 it will be $19,000. Check the IRS website or your tax software each year to confirm the current limit.

Key Takeaways

  • You can give $18,000 per recipient per year in 2024 without filing Form 709 or owing gift tax.
  • Married couples can each give $18,000 to the same person, totaling $36,000 per recipient per year.
  • Gifts above the annual exclusion must be reported on Form 709, but you still owe no tax unless you exceed your lifetime exemption of $13.61 million.
  • Certain gifts do not count toward the limit at all, including direct tuition payments, direct medical payments, and gifts to spouses who are U.S. citizens.
  • The annual exclusion amount increases with inflation and changes most years.

What happens if you give more than $18,000 to one person

If you give $25,000 to your daughter in one year, you must file Form 709 to report the $7,000 overage. You do not pay tax on it when ready. Instead, that $7,000 counts against your lifetime exemption, which is $13.61 million in 2024. You only owe tax if your total gifts over your lifetime exceed that $13.61 million threshold.

Most people never reach the lifetime exemption. You would need to give away millions of dollars over many decades to trigger actual gift tax. Filing Form 709 is a reporting requirement, not a tax bill. The form tells the IRS you made a large gift and how much of your lifetime exemption you used.

If you are married and your spouse also gives gifts, you can split the gifts between you on Form 709. This means if you give $25,000 to your daughter, you and your spouse can each report $12,500 on the form, which keeps each of you under the annual exclusion. Both of you must consent to gift splitting, and you must both file Form 709 that year.

Gifts that do not count toward the $18,000 limit

Some gifts are completely exempt from the annual exclusion limit. Direct tuition payments do not count if you pay the school or university directly. You could pay $50,000 in tuition for your grandchild and also give them $18,000 in cash in the same year. The tuition payment does not reduce your $18,000 allowance.

Direct medical payments work the same way. If you pay a hospital or doctor directly for someone else's medical care, that payment does not count toward the annual exclusion. You could pay $100,000 in medical bills and still give $18,000 to that person in other forms.

Gifts to your spouse who is a U.S. citizen have no limit at all. You can give your spouse any amount of money or property without filing a return or using your lifetime exemption. Gifts to charities also have no limit and may produce a tax deduction for you.

The key rule: the payment must go directly to the institution (school, hospital, charity) or to a spouse. If you give money to your grandchild and they pay the tuition, that counts as a regular gift and uses your $18,000 limit.

State gift tax rules vary

The $18,000 federal exemption applies everywhere in the United States. However, some states have their own gift tax on top of the federal tax. Only a few states currently impose gift tax: Connecticut, Delaware, Illinois, Louisiana, Mississippi, North Carolina, and Tennessee. Each state sets its own annual exclusion amount and lifetime exemption.

If you live in or give to someone in one of these states, you may need to file a state gift tax return even if you do not owe federal tax. The state limits are usually lower than the federal limit. For example, Connecticut's annual exclusion is $15,000. Check your state's tax department website to learn the current rules.

Most states have no gift tax at all. If you live in a state without gift tax, you only follow the federal rules.

How to report gifts on Form 709

Form 709 is titled "United States Gift (and Generation-Skipping Transfer) Tax Return." You file it with your federal tax return or separately if you do not file an income tax return that year. The form asks for the donor's name, the recipient's name and address, the date of the gift, a description of what was given, and the fair market value on the date of the gift.

If you gave stock, real estate, or other property instead of cash, you must determine its fair market value. For stock, use the closing price on the date you gave it. For real estate, you may need a professional appraisal. For personal property like jewelry or art, an appraisal is often required.

You file Form 709 by the tax return important date, usually April 15 of the following year. If you file your income tax return early, you can file Form 709 with it. If you do not file an income tax return, Form 709 is still due by April 15.

Gifts to minors and trusts

Gifts to minors count toward the $18,000 annual exclusion just like gifts to adults. You can give $18,000 to your 10-year-old grandchild without filing, the same as you could give to your adult child. The age of the recipient does not change the limit.

Gifts to a trust are more complicated. A gift to a trust usually does not may have access to for the annual exclusion unless the trust is structured to allow the beneficiary to withdraw the money when ready. This is called a Crummey trust, named after a court case. If the beneficiary cannot withdraw the gift right away, the entire gift counts against your lifetime exemption, not your annual exclusion.

If you regularly give to trusts or want to use trusts for estate planning, consult a tax professional or estate attorney. The rules depend on the trust's terms and your goals.

Frequently Asked Questions

Do I owe tax if I give someone $20,000?

You do not owe tax, but you must file Form 709 to report the $2,000 overage. That $2,000 counts against your $13.61 million lifetime exemption. Unless you have already given away millions, you will never pay tax on it.

Can I give $18,000 to the same person every year?

Yes. The annual exclusion resets on January 1 each year. You can give $18,000 to your daughter in 2024, another $18,000 in 2025, and another $18,000 in 2026 without any tax consequences. Each year is separate.

What if I give someone a loan instead of a gift?

A loan is not a gift if you charge interest and have a written agreement. However, you must charge at least the IRS minimum interest rate, which changes monthly. If you do not charge interest or charge less than the minimum, the IRS may treat it as a gift. Consult a tax professional before making large loans to family members.

Do gifts count as income for the person who receives them?

No. The recipient does not report gifts as income on their tax return. Gift tax is paid by the giver, not the receiver. The person who receives the gift owes no tax on it.

What if I give someone property worth more than $18,000?

You must determine the fair market value of the property on the date you gave it. If it is worth more than $18,000, you file Form 709 and report the excess. The excess counts against your lifetime exemption. If the property later increases in value, that increase does not create additional gift tax.