What is the Gift Tax?
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Table of Contents
What is the Gift Tax, and how does it work in 2025?
The federal Gift Tax applies when you give money or property during your lifetime, but in 2025 you can give up to US$19,000 per person tax-free under the annual exclusion.
Meanwhile, the Estate Tax looks at what you own when you die. Both systems share one lifetime allowance, so reportable gifts you make now reduce what’s left of that allowance later.
How much can you give without tax in 2025?
The annual exclusion is US$19,000 per recipient. You can give up to US$19,000 to as many people as you like this year, and it won’t touch your lifetime allowance.
What’s the lifetime number in 2025?
The lifetime estate-and-gift exemption is about US$13,990,000. You only pay Gift Tax out of pocket after your cumulative reportable gifts exceed that figure. Most people never reach it, but many still file to track usage.
Who qualifies for the annual exclusion?
The annual exclusion applies to present-interest gifts, which means the person can use the gift now. It’s per recipient, per year. If you give US$19,000 to each of three people, you’ve used three exclusions.
If you’re married and living together, then gift-splitting lets a married couple combine their exclusions so a single recipient can receive US$38,000 in 2025 without dipping into their lifetime allowance.
What can you give?
Generally, cash, but the same rules apply to stock, crypto, cars, or artwork. For non-cash gifts, use fair market value on the date of the gift and keep a note or statement that shows how you arrived at that value.
A few transfers don’t use your exclusion at all when paid directly:
- Qualified tuition paid to the school
- Qualified medical payments paid to the provider
Spousal gifts have special treatment. Gifts to a US-citizen’s spouse are generally unlimited. Gifts to a non-citizen spouse have a larger annual limit than the standard exclusion; if that’s your situation, it’s best to check the current figure before you wire funds.
US expats follow the same federal rules whether the account is in the US or overseas. The location of the bank doesn’t change whether something is a gift.
Given a gift lately? Let’s discuss your US tax implications.
When do you file Form 709?
You file Form 709 (United States Gift Tax Return) to report certain gifts, even though you usually won’t owe tax until your lifetime exemption is used up.
You’ll file if:
- You gave more than US$19,000 in 2025 to any one person
- You and your spouse elect gift-splitting (both spouses file)
- You made a gift to a trust that doesn’t qualify as a present-interest gift
- You made large non-cash gifts and want a clear valuation trail
- You front-loaded a 529 plan using the five-year averaging election
Do I need to file Form 709 for a gift to family?
Yes, if a single family member received over US$19,000 in 2025, or if you’re splitting gifts with your spouse. Filing just tracks the amount over the annual exclusion and reduces your lifetime exemption by that excess.
Timing and records:
- Due with your individual return (typically April). An extension of your Form 1040 also extends Form 709.
- Keep a simple log: recipient, date, amount or fair market value, and any valuation documents.
- If you paid tuition or medical bills directly, note the payee and purpose so you can show why no return was required.
Who pays the Gift Tax, the giver or the recipient?
For federal tax purposes, the giver is responsible for Gift Tax, not the recipient.
The person receiving the money or property doesn’t report the gift as income and typically doesn’t owe federal income tax on it.
If a gift is large enough to be reportable, the giver files Form 709 so the amount over the annual exclusion reduces the giver’s lifetime estate-and-gift exemption.
Most people still owe no Gift Tax because they haven’t used up that lifetime exemption. In rare cases where tax is due and the giver doesn’t pay, the IRS can pursue the recipient up to the value of the gift, but that’s not the usual path.
State rules are separate. A few states have inheritance taxes paid by the recipient on transfers at death. That’s different from the federal Gift Tax system, which focuses on lifetime transfers by the giver.
What counts toward the limit (and what doesn’t): tuition, medical bills, spouse, and charity
Payments made directly to a school or medical provider don’t count toward the Gift Tax limit.
Start with the annual exclusion (2025: US$19,000 per recipient). Gifts at or under that amount to any one person in the year don’t use your lifetime exemption. Go over it for a single person and you’ll usually file Form 709 so the excess is tracked.
Some transfers don’t count toward the limit when you follow the direct-payment rules:
- Tuition paid directly to the school. If you pay the university or school yourself, the full amount is outside Gift Tax rules. Payments to the student don’t qualify for this exception.
- Qualified medical costs paid directly to the provider. That can include diagnosis, treatment, and allowable insurance premiums when you pay the insurer or provider. Paying the patient first doesn’t qualify.
Spousal and charitable transfers sit in their own lanes:
- Gifts to a US-citizen spouse are generally unlimited for Gift Tax.
- Gifts to a non-citizen spouse have a special annual limit that’s higher than the standard exclusion and adjusts for inflation. If that’s your situation, check the current figure before transferring.
- Gifts to qualified charities are handled under charitable rules, not Gift Tax. With proper receipts, they don’t use your annual exclusion or your lifetime exemption.
How do the annual exclusion and lifetime exemption work together?
There are two buckets. The first is the annual gift exclusion, which lets you give US$19,000 per recipient in 2025 without touching any bigger allowance. The second is the lifetime estate-and-gift exemption, which is about US$13,990,000 in 2025.
If you give more than US$19,000 to one person this year, the extra doesn’t trigger a tax bill right away. It simply reduces your lifetime bucket, and you track that reduction on Form 709.
Here’s a quick example: Say you gift a niece US$50,000 in 2025. The first US$19,000 is covered by the annual exclusion. The remaining US$31,000 is reported and uses US$31,000 of your lifetime exemption.
No tax is due now. You just keep a running total so you and your executor know how much of the lifetime amount remains.
FAQ'S
Do US gift rules change if I give money to someone outside the US?
No. If you’re a US person, the same federal gift tax rules apply no matter where the recipient lives or which country the account is in.
Does an interest-free “loan” count as a gift?
If I gift stock or crypto, what basis does the recipient get?
I received a big gift from a non-US person, do I have to file anything?
Can I reverse a gift if I change my mind?
