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

You can give up to a set dollar amount per person per year without filing a gift tax return with the IRS. This is called the annual exclusion. For 2024, the annual exclusion is $18,000 per recipient. For 2025, it rises to $19,000 per recipient. The amount changes most years based on inflation, rounded to the nearest $1,000.

The key word is "per person." 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 requires a return. There is no limit on how many people you can give to. The only limit is how much you can give to each individual person.

If you are married, your spouse can also give the annual exclusion amount to each person. So a married couple can give $36,000 per person per year (each spouse gives $18,000) without filing. This is called gift splitting, and it requires both spouses to consent, but no special form is needed unless you exceed the exclusion.

Key Takeaways

  • You can give up to $18,000 per person in 2024 or $19,000 in 2025 without filing a gift tax return, and the amount increases with inflation.
  • The annual exclusion applies per recipient, so you can give that amount to multiple people in the same year with no reporting required.
  • Married couples can combine their exclusions, allowing $36,000 per person per year if both spouses agree to gift splitting.
  • Gifts that exceed the annual exclusion do not when ready trigger a tax bill; instead, they reduce your lifetime gift and estate tax exemption.
  • Certain gifts — such as tuition paid directly to a school or medical expenses paid directly to a provider — do not count toward the annual exclusion at all.

What happens if you give more than the annual exclusion

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. Filing the form does not mean you owe a tax bill right away. Instead, the excess amount is subtracted from your lifetime gift and estate tax exemption.

The lifetime exemption is currently $13.61 million per person (for 2024). This means you can give away or leave behind up to that amount over your entire life and at death without owing federal gift or estate tax. Every dollar you give away above the annual exclusion reduces that exemption dollar for dollar. Most people never reach the lifetime exemption, so they never owe gift tax even if they file Form 709.

However, the lifetime exemption is scheduled to drop to roughly $7 million per person on January 1, 2026, unless Congress changes the law. If you are planning large gifts, the timing matters. Giving now uses your current higher exemption; waiting until 2026 means a smaller exemption to work with.

Gifts that do not count toward the annual exclusion

Some gifts are completely exempt from the annual exclusion and do not reduce your lifetime exemption either. The most common are direct payments for tuition or medical care. You can pay a school, university, or medical provider directly on behalf of someone else, and that payment does not count as a gift at all — no matter how large.

The key is that you must pay the provider directly. If you give money to the person and they pay the tuition or medical bill, it counts as a regular gift and uses up your annual exclusion. The provider must be the one receiving the payment from you.

Gifts to spouses who are U.S. citizens also have no limit and do not use the annual exclusion. You can give your spouse any amount. Gifts to charities that hold a tax exemption (501(c)(3) organizations, for example) also do not count. Gifts to political organizations and candidates have their own rules and do not use your personal annual exclusion.

When you need to file Form 709 even if you do not owe tax

You must file Form 709 if you give more than the annual exclusion to any one person in a year, even if you do not owe tax. The form tells the IRS that you are using part of your lifetime exemption. Filing protects you because it starts the statute of limitations — the IRS generally has three years to challenge the value of the gift or your exemption calculation.

If you do not file and the IRS later questions the gift, the statute of limitations may not have started, giving them more time to audit. Filing is also important if you are married and want to use gift splitting. Both spouses must file Form 709 to elect gift splitting, even if neither owes tax.

Form 709 is due by April 15 of the year after the gift. You can file it with your income tax return or separately. If you file your income tax return early, you can still file Form 709 later that year without penalty, as long as it arrives by April 15.

Gifts of property and how value is determined

The annual exclusion applies to gifts of money, real estate, investments, vehicles, artwork, and any other property. What matters is the fair market value of what you give on the date of the gift. Fair market value is what a willing buyer would pay a willing seller, neither under pressure.

For cash and publicly traded stocks, fair market value is straightforward. For real estate, artwork, or other unique property, you may need a professional appraisal. The IRS can challenge your valuation, especially for large gifts. If you give away property worth significantly more than you claim, you may face penalties and interest.

If you give someone a loan instead of a gift, different rules explore. A genuine loan requires a written promissory note and an interest rate at least as high as the IRS's applicable federal rate (AFR). If you do not charge interest or do not have a written note, the IRS may treat it as a gift instead.

Gifts to minors and custodial accounts

You can give up to the annual exclusion amount to a minor without any special account or trust. However, if you want to give more, or if you want the money to be held and managed until the child reaches adulthood, you can use a Uniform Transfers to Minors Act (UTMA) account or Uniform Gifts to Minors Act (UGMA) account. These accounts still allow you to use the annual exclusion per year.

Another option is a 529 education savings plan. You can contribute up to the annual exclusion per beneficiary per year without filing Form 709. However, 529 plans also allow a special election: you can contribute five years' worth of annual exclusions in a single year ($90,000 for 2024 if you are single, $180,000 if married) without gift tax, as long as you do not make other gifts to that person that year and you file Form 709 to elect this treatment.

State gift tax and what varies by location

The federal government has a gift tax, but most states do not. Only a handful of states — Connecticut, Delaware, Illinois, Louisiana, Mississippi, North Carolina, and Tennessee — have ever had a state gift tax, and most have repealed theirs. Check your state's tax authority website to confirm whether your state taxes gifts.

Some states have an estate tax (a tax on what you leave behind at death), which is separate from gift tax. An estate tax does not explore to gifts you make during your lifetime, only to your estate after you die. If your state has an estate tax, the rules and exemption amounts differ from federal rules.

Frequently Asked Questions

Can I give someone $20,000 and just not tell the IRS?

You can give $20,000 without the recipient reporting it as income — gifts are not taxable income to the person who receives them. However, you must file Form 709 to report the $2,000 that exceeds the annual exclusion. The IRS may discover unreported gifts through bank records, especially large transfers. Filing protects you by starting the statute of limitations.

Does my spouse's gift to someone count against my annual exclusion?

No. Each person has their own annual exclusion. Your spouse's $18,000 gift to your nephew does not reduce your $18,000 exclusion to the same nephew. If you both give to the same person in the same year, you each get the full exclusion. If you want to combine your exclusions (gift splitting), you must both file Form 709 and elect it.

If I give someone money for a down payment on a house, does that count as a gift?

Yes, unless you have a written loan agreement with an interest rate at least as high as the IRS's applicable federal rate. If you straightforward give money with no expectation of repayment, it is a gift and counts toward the annual exclusion. If you intend it as a loan, document it in writing to avoid the IRS treating it as a gift later.

Can I give my child money for college tuition and have it not count?

Only if you pay the college directly. If you give your child $25,000 and they pay tuition, it counts as a gift and uses your annual exclusion. If you pay the college $25,000 directly, it does not count as a gift at all. The payment must go to the educational institution, not to the student.

What if I give someone a car — how is that valued for gift tax?

The fair market value of the car on the date you give it is what counts. You can use the Kelley Blue Book value or a professional appraisal. If the car is worth $22,000 and you give it away in 2024, you have exceeded the $18,000 annual exclusion by $4,000, and you must file Form 709 to report the excess.