The IRS gift tax applies to transfers of money or property from one person to another without receiving full market value in return. However, most Americans never actually pay gift tax due to the annual exclusion and large lifetime exemption.

Annual Gift Tax Exclusion

  • 2024: $18,000 per recipient
  • 2025: $19,000 per recipient

You can give up to this amount to any number of people each year with no gift tax and no filing requirement. Married couples can combine exclusions to give $38,000 per recipient in 2025.

Lifetime Gift and Estate Tax Exemption

  • 2024: $13,610,000 per person
  • 2025: $13,990,000 per person

Gifts exceeding the annual exclusion reduce your lifetime exemption. Most people will never use up this exemption.

When Do You Need to File Form 709?

File IRS Form 709 (United States Gift and Generation-Skipping Transfer Tax Return) any year you give a gift exceeding the annual exclusion to any one person. Filing the form uses some of your lifetime exemption β€” it does not necessarily mean you owe tax.

What Is Never Taxable as a Gift?

  • Tuition paid directly to an educational institution
  • Medical expenses paid directly to a healthcare provider
  • Gifts to a spouse (if US citizen) β€” unlimited
  • Gifts to political organizations

Source: IRS Publication 559; IRS Rev. Proc. 2024-40; Form 709 Instructions