The annual exclusion lets you give money to as many people as you want without reporting it to the IRS

You can give up to $18,000 per person per year (in 2024) without filing a gift tax return with the IRS. This amount is called the annual exclusion. The IRS adjusts it every year for inflation, usually in increments of $1,000.

The key rule: the exclusion applies to each recipient separately. You can give $18,000 to your child, $18,000 to your spouse, $18,000 to your sibling, and $18,000 to a friend in the same year, and none of it requires a return. If you are married and your spouse agrees, you can each give $18,000 to the same person, which means $36,000 total from both of you to one recipient without reporting.

If you give more than $18,000 to one person in a single year, you must file Form 709 (United States Gift Tax Return) with the IRS, even if you do not owe tax. Filing the form does not mean you pay tax — it means you are using part of your lifetime exemption, which is explained below.

Key Takeaways

  • You can give $18,000 per person per year (2024) without filing a gift tax return, and this amount resets on January 1 each year.
  • Married couples can each give $18,000 to the same person in one year ($36,000 total) if they both agree to split the gift.
  • Gifts to your spouse and to charities do not count toward the annual exclusion and have no limit.
  • If you give more than $18,000 to one person in a year, you file Form 709 but usually do not owe tax because you have a lifetime exemption of $13.61 million (2024).
  • The annual exclusion amount changes each year; check the IRS website or your tax software for the current year's limit.

Gifts that do not count against your annual exclusion

Certain gifts are not subject to the annual exclusion at all. Gifts to your spouse (if your spouse is a U.S. citizen) have no limit — you can give your spouse any amount of money without filing a return or using your lifetime exemption. Gifts to charities that are registered with the IRS also have no limit and do not require a gift tax return.

Payments made directly to a school or university for tuition, and payments made directly to a medical provider for someone else's medical care, also do not count as taxable gifts. The payment must go straight to the institution, not to the person. If you give money to your grandchild and they use it to pay tuition, that counts as a gift and uses your exclusion.

Gifts of future interest — such as a promise to give money later, or a gift that the recipient cannot use right away — are treated differently and may not may have access to for the annual exclusion. Gifts of present interest (money or property the recipient can use when ready) are what the exclusion covers.

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

If you give $25,000 to your child in one year, the first $18,000 is covered by the annual exclusion. The remaining $7,000 is a taxable gift. You must file Form 709 to report it.

Filing Form 709 does not mean you owe tax when ready. Instead, the $7,000 is subtracted from your lifetime gift and estate tax exemption, which is $13.61 million per person in 2024. You only owe tax if your total gifts and estate exceed that exemption amount. For most people, this exemption is so large that they never owe gift tax during their lifetime.

The lifetime exemption is separate from the annual exclusion. Think of it as a safety net: you can give away up to $13.61 million over your entire life (in 2024) before owing any federal gift tax. Each year you give more than $18,000 to someone, you use up part of that exemption, but you do not owe tax unless you exceed the total.

How to track gifts and when to file Form 709

Keep a record of any gift over $18,000 to a single person in a calendar year. Write down the date, the recipient's name, the amount, and what was given (cash, property, or other asset). If you give property instead of money, you need to know its fair market value on the date of the gift.

You must file Form 709 by April 15 of the year after you made the gift. If you file your income tax return early, you can file Form 709 at the same time. If you file late or request an extension on your income tax return, the same extension applies to Form 709.

Form 709 is filed with your federal tax return. You do not mail it separately. If you use tax software, most programs will ask whether you made any gifts over the annual exclusion and will prepare Form 709 for you if needed. If you work with a tax professional, tell them about any large gifts you made during the year.

Gifts between spouses and to non-citizens

Gifts between spouses who are both U.S. citizens have no limit and do not require a return. You can give your spouse $1 million, $10 million, or any amount without filing anything with the IRS.

If your spouse is not a U.S. citizen, the rules change. You can give a non-citizen spouse up to $185,000 per year (in 2024) without filing a return. This is a higher annual exclusion than the standard $18,000, but it is still a limit. Amounts over $185,000 require Form 709 and use your lifetime exemption.

The non-citizen spouse exclusion also adjusts yearly for inflation. Check the IRS website or ask your tax professional for the current year's amount if this applies to you.

State gift tax and other considerations

The federal government is not the only body that may tax gifts. A small number of states — Connecticut, Delaware, Illinois, Louisiana, Mississippi, North Carolina, and Tennessee — have their own gift tax or inheritance tax. If you live in one of these states or give money to someone who lives in one, you may need to file a state return in addition to the federal Form 709.

State rules vary widely. Some states tax only gifts received after a certain date, some tax only large estates, and some have already repealed their gift tax. Contact your state's tax department or a tax professional in your state to learn whether state gift tax applies to you.

Federal gift tax and state gift tax are separate. Filing Form 709 with the IRS does not automatically file anything with your state. You may need to file both.

The lifetime exemption expires at the end of 2025

The current lifetime exemption of $13.61 million per person (in 2024) is set to expire on December 31, 2025. After that date, the exemption is scheduled to drop to approximately $7 million per person, adjusted for inflation. This means that gifts over the annual exclusion will use up your exemption much faster starting in 2026.

This is a major change, but it does not affect gifts within the annual exclusion. You can continue to give $18,000 per person per year without any concern. The exemption change affects only people who give away large amounts in a single year or over their lifetime.

If you are planning to give away a large sum of money, consult a tax professional or estate attorney before the end of 2025 to understand how the exemption change may affect your situation.

Frequently Asked Questions

Does the $18,000 annual exclusion reset on January 1?

Yes. The exclusion is per calendar year. If you give $18,000 to your child on December 31, you can give another $18,000 to that same child on January 1 of the next year without filing a return. Each year is separate.

If I give my child $20,000, do I owe tax on the extra $2,000?

No. You file Form 709 to report the $2,000 overage, but you do not owe tax. The $2,000 is subtracted from your lifetime exemption. You only owe tax if your total lifetime gifts exceed $13.61 million (in 2024).

Can I give money to my grandchild without telling my child?

Yes. A gift is between you and the recipient. You can give money to your grandchild directly without your child's knowledge or permission. The gift still counts toward the annual exclusion and may require Form 709 if it exceeds $18,000.

What if I give cash and do not have a receipt?

Keep a record anyway. Write down the date, the recipient's name, and the amount. If the IRS asks, you will need to show that the gift was made. A bank transfer or check is easier to document than cash, but a written note in your records is better than nothing.

Do I have to report gifts under $18,000?

No. Gifts within the annual exclusion do not require a return. You only file Form 709 if you give more than $18,000 to one person in a single year.