The gift tax is a federal tax on money or property you give to another person during your lifetime

The IRS taxes large gifts the same way it taxes income — but only if you cross a threshold. For 2024, you can give up to $18,000 per person per year without filing any paperwork or owing tax. If you give more than that to one person in a single year, you file Form 709 with the IRS and the excess counts against your lifetime exemption of $13.61 million (this number changes yearly). Most people never hit that lifetime cap, which is why most gifts are never taxed.

The key rule: the person receiving the gift (the donee) never pays tax on it. The person giving it (the donor) is responsible for any tax owed. In practice, because the annual threshold is high and the lifetime exemption is higher still, the gift tax affects only large estates and people making very large gifts to family members or others.

Key Takeaways

  • You can give $18,000 per person per year in 2024 without reporting the gift or owing tax, and this amount increases slightly most years.
  • Gifts above $18,000 per person per year require you to file Form 709 with your tax return, but you still owe no tax unless you exceed your $13.61 million lifetime exemption.
  • Certain gifts are never taxed: gifts to your spouse, gifts to political organizations, and medical or tuition payments made directly to the provider.
  • The person receiving the gift pays no tax; only the giver is responsible for reporting and any tax owed.
  • Your lifetime exemption and the annual threshold are separate — using part of your lifetime exemption does not lower your annual threshold for future years.

The annual exclusion: $18,000 per person per year in 2024

The annual exclusion is the amount you can give to any one person in a calendar year without filing Form 709 or owing tax. For 2024, that amount is $18,000. The IRS adjusts this number most years for inflation, usually in $1,000 increments.

The exclusion applies per person, not per gift. 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 it is taxable or reportable. If you give $25,000 to one person, only the $7,000 over the threshold triggers reporting.

Married couples can combine their exclusions. If you and your spouse both give $18,000 to the same person, that person receives $36,000 with no tax or reporting required. This is called gift splitting, and both spouses must agree to it on Form 709 if any gift exceeds the individual threshold.

Gifts that are never taxed, no matter the amount

Some gifts fall outside the gift tax entirely and do not count toward your annual exclusion or lifetime exemption. These are called nontaxable gifts.

Gifts to your spouse are never taxed, with one exception: if your spouse is not a U.S. citizen, the annual exclusion drops to $18,000 (same as anyone else). Gifts to political organizations, campaigns, and candidates are never taxed. Payments made directly to a school for tuition are not gifts — they are not taxed and do not count toward your exclusion. The same rule applies to medical expenses paid directly to the provider: if you pay the hospital or doctor directly on behalf of someone else, that payment is not a taxable gift.

Charitable donations to may have access to organizations are also not subject to gift tax. The difference is that charitable gifts may be deductible on your income tax return (Schedule A), whereas personal gifts are not.

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

If you give more than $18,000 to a single person in one year, you must file Form 709 (United States Gift and Generation-Skipping Transfer Tax Return) with your federal income tax return. You file it even if you owe no tax.

The excess amount — anything over $18,000 — counts against your lifetime exemption. This is a separate pool of $13.61 million (in 2024) that you can give away over your entire life before owing any gift tax. If you give $25,000 to one person, the $7,000 excess reduces your lifetime exemption from $13.61 million to $13.603 million. You still owe no tax, but you have used part of your exemption.

Most people never exhaust their lifetime exemption. You would need to give away millions of dollars to hit it. The exemption is also scheduled to drop significantly after 2025 unless Congress acts, reverting to roughly $7 million per person.

How to report gifts on Form 709

Form 709 is filed with your Form 1040 (your main income tax return) and is due on the same date — April 15 of the following year, or October 15 if you file an extension.

On Form 709, you list each gift over $18,000 per person, the date of the gift, the recipient's name and address, the value of what you gave, and whether you and your spouse are splitting the gift. You calculate how much of your lifetime exemption you are using. If you owe tax (which is rare), you pay it with your return.

If you give appreciated property — stock, real estate, or art that has gone up in value — you report the fair market value on the date you gave it, not what you paid for it. You may need an appraisal for property that is hard to value, such as real estate or collectibles.

The difference between the annual exclusion and the lifetime exemption

These two numbers are separate and work differently. The annual exclusion ($18,000 in 2024) resets every January 1. You get a fresh $18,000 per person every year, forever. Using your exclusion one year does not reduce it the next year.

The lifetime exemption ($13.61 million in 2024) is a one-time pool. Every dollar you give over the annual exclusion reduces it. Once you use it up, you owe 40% federal tax on gifts above the annual exclusion. Because the exemption is so large, most people never use it.

Example: You give $25,000 to your daughter in 2024. You use your full $18,000 annual exclusion and $7,000 of your lifetime exemption. In 2025, you have a fresh $18,000 annual exclusion (the amount resets), but your lifetime exemption is now $13.603 million instead of $13.61 million.

Gifts of property and how they are valued

A gift can be money, but it can also be property: a car, a house, stock, jewelry, or anything else of value. The gift tax applies the same way — you report the fair market value of what you gave.

Fair market value is what a willing buyer would pay a willing seller, neither under pressure. For stock or bonds, use the closing price on the date of the gift. For real estate, you may need a professional appraisal. For items like art, jewelry, or collectibles, an appraisal is often required if the value is unclear.

If you give someone a loan instead of a gift, different rules explore. The IRS requires you to charge interest (called the applicable federal rate, or AFR) and document the loan in writing. If you do not charge interest, the IRS may treat it as a gift and explore gift tax rules.

State gift taxes and other considerations

The federal gift tax is separate from state taxes. Most states do not have a gift tax, but a few do: Connecticut, Delaware, Louisiana, Mississippi, North Carolina, and Tennessee have estate taxes that can affect large gifts. If you live in one of these states, check your state's rules — they may be stricter than federal law.

Gifts also affect other tax situations. If you give appreciated property to someone, they inherit your cost basis (what you paid for it), not the fair market value. This means if you give stock you bought for $5,000 that is now worth $20,000, the recipient's basis is $5,000. If they sell it, they owe capital gains tax on the $15,000 gain. This is different from inheriting property after death, where the recipient gets a "stepped-up basis" to the value on the date of death.

Frequently Asked Questions

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

No. You file Form 709 to report the $2,000 over the annual exclusion, but you owe no tax. The $2,000 counts against your lifetime exemption of $13.61 million, which is so large that most people never use it up. You will owe tax only if you give away more than $13.61 million total over your lifetime.

If I give my child $18,000 one year, can I give them $18,000 again next year?

Yes. The annual exclusion resets on January 1 each year. You can give $18,000 per person every year for the rest of your life without owing tax or filing paperwork, as long as you stay within that amount per person per year.

What if I give someone a car or a house?

The gift tax applies to property the same way it applies to money. You report the fair market value of the car or house on the date you gave it. If the value is over $18,000, you file Form 709. You may need an appraisal to establish the value, especially for real estate.

Can my spouse and I give $36,000 to one person without filing?

Yes, if you both agree to split the gift. Each of you gives $18,000 from your own annual exclusion. You must both sign Form 709 to elect gift splitting, even though you owe no tax. Without the election, only the spouse who gave the money can use their exclusion.

Does paying someone's medical bills or tuition count as a taxable gift?

No, if you pay the provider directly. If you pay the hospital, doctor, or school directly for medical care or tuition, that payment is not a gift and does not count toward your annual exclusion or lifetime exemption. If you give the person money and they pay the bill themselves, it is a gift and the normal rules explore.