Gift Tax: 2025 Limit, How It Works And Who Has To Pay

If you’re worried about owing gift taxes if you give money or property away, keep this in mind: Very few taxpayers end up on the hook for this particular tax.

There are two reasons why.

1. You can give away up to $19,000 in 2025 (it was $18,000 in 2024) per person — to as many people as you want, according to the IRS. And if you’re married your spouse can do the same, which means you and your spouse can gift up to $38,000 to each recipient, with no limit on the number of recipients.
2. If you exceed that exemption amount for any one giftee — say you give $20,000 to your child — you don’t then owe the gift tax. Instead, all you need to do is file a gift tax return (more on this below). Then, any gifts that you reported on gift tax returns over the course of your life will be subtracted from your lifetime exemption amount. If those reported gifts exceed that lifetime amount, then you’ll likely owe gift taxes. The current lifetime exemption amount? Almost $14 million. You could almost say the gift tax is a nice problem to have.

One important caveat: Congress is currently debating a tax bill that would permanently raise the lifetime exemption amount to $15 million starting in 2026 (adjusted for inflation annually after that). But if that bill doesn’t become law, the lifetime gift-tax exemption amount could drop to about $7 million, from $13.99 million currently, in 2026.

What is the gift tax?

The gift tax imposes a tax on large gifts, preventing massive transfers of wealth without any tax implications. It is a transfer tax, not an income tax. As noted, recipients generally don’t pay the gift tax.

The 2025 exclusion amount is $19,000 per giver, per recipient. That is, you can give $19,000 to any number of individuals in 2025 and you won’t owe gift tax on those gifts. That figure is adjusted for inflation each year; the annual gift tax threshold was $18,000 in 2024.

When you surpass the annual threshold, you must file IRS Form 709 with your tax return, declaring the size of the gift. But even that doesn’t mean you’ll be taxed on it. Instead, a gift is taxed only after you exceed your lifetime estate and gift exemption, which in 2025 is just under $14 million, up from $13.61 million in 2024. That amount is doubled for married couples. Only gifts that exceed the annual threshold count toward that lifetime limit. And only after exceeding that limit do you owe taxes.

A single person who gives gifts of up to $19,000 each to several different recipients in a year won’t be affected by the gift tax and won’t have to file a gift tax declaration. But if you give several $19,000 gifts plus just one $20,000 gift in 2025, you’ll need to file a Form 709.

One thing to be wary of: How the IRS defines what counts as a gift. For instance, if you sell a house for substantially less than the IRS would deem its fair market value — perhaps as a favor to a family member or friend — the difference between the market value and your price may be considered a gift and may need to be reported on a gift tax return if it exceeds $19,000.

Here’s how the IRS puts it: “The gift tax applies not only to the free transfer of any kind of property, but also to sales or exchanges, not made in the ordinary course of business, where value of the money (or property) received is less than the value of what is sold or exchanged.”

Here’s another example that might surprise you: If you make someone an interest-free loan or charge a below-market interest rate, the interest you could have charged but didn’t may be considered a gift.

What is the gift tax rate?

After giving out money or property exceeding the lifetime threshold, your gift tax rate will be between 18 percent and 40 percent, depending on how much money you gave away above your lifetime limit.

Gift tax rates

Gift and estate taxes are complex, so be sure to review the IRS instructions for Form 709 (that’s the gift tax return), or consult with a financial advisor.

How the gift tax works

Each year that you exceed the annual gift threshold, you need to declare these gifts to the IRS. But you won’t be subject to tax until your excess cumulative gifts exceed the lifetime estate and gift exemption.

For example, suppose you gifted $25,000 to a family member in 2025. Your excess gift is $6,000 for that year (that’s $25,000 minus the $19,000 annual gift tax exclusion). That $6,000 excess applies to your lifetime exclusion of $13.99 million for a single taxpayer or $27.98 million for a married couple; that is, your lifetime exclusion is reduced by $6,000.

The lifetime exemption amount is tied to the estate tax exemption, since the lifetime exemption counts against the combination of taxable gifts — those exceeding the annual gift tax exclusion amount per giver per recipient — made during life and from your estate after death.

Some kinds of gifts are exempted entirely from gift tax, including:

• Gifts you make directly to a medical institution or school to pay for someone’s medical or educational expenses.
• Gifts to a political organization to be used by the organization.
• Gifts to one’s spouse, though some limits apply if the spouse is not a U.S. citizen.
• Charitable giving.

That means good planning can help eliminate gift and estate taxes or at least minimize them.

Who pays the gift tax

The gift giver pays the gift tax, if any is due. Generally, if the giver owes a gift tax, the IRS doesn’t require the recipient to pay the tax.

In general, very few people pay the gift tax, since even large gifts are covered by the lifetime estate and gift exemption.

But where less affluent people may be affected is knowing that they need to declare a larger gift to the IRS. If significant gifting to family or friends is important to you, it may be worth spreading out gifts to family members and friends so that you don’t exceed the annual per recipient per year exemption limit ($19,000 in 2025; $18,000 in 2024), saving you some tax return complexity.

How to avoid the gift tax

Pretty much everyone can avoid the gift tax, but if you’re in the (dare we say?) enviable position of being able to give large amounts, here are some important tips:

• Couples can double up. If you’re married, as a couple you can give $38,000 to one recipient without exceeding the annual exemption. This is referred to as “gift splitting.” Couples who plan to do this should file a gift tax return — even if the amount they give doesn’t exceed the annual exemption limit — so they can properly report and elect their gift splitting.
• Distribute gifts over years. Spread out gifts over a period of years instead of giving a big chunk at one time.
• Target giving to exempted categories. Pay directly for medical costs, educational expenses and other exempted categories, rather than giving funds directly to the individual.
• Get a comprehensive view of your estate. Factor into your estate plan how much you’ve given or plan to give in your lifetime and what you expect to give through your estate, since the lifetime exemption also includes anything you leave in your estate after you die.
• Work with an expert. Talk with your accountant, financial planner or wealth management team about how you can distribute your assets in ways that won’t trigger the gift tax. Large and complex financial, business or real estate holdings can generate big tax bills if you don’t have someone helping you work out the logistics.

 —Sean Jackson contributed to this story.