Annual Gifting

Annual Gifting

Published On: January 23, 2025

Written by: Ben Atwater and Matt Malick

Clients often ask us about gifting to family and friends. Affluent families generally use the annual exclusion amount as a guidepost for giving.

The annual exclusion for gift taxes is the amount of money or property that an individual can give away to as many non-spouse individuals as they want within a single year without triggering federal gift tax reporting obligations or gift tax liability.

For 2025, the Internal Revenue Service (IRS) has set the annual exclusion for gift taxes at $19,000 per gift, meaning you can give up to $19,000 to as many people as you like and will not be required to report those gifts to the IRS.

The general rule is that any gift is a taxable gift. However, there are exceptions to this rule. The following gifts are not taxable gifts:

  • Gifts at or below the annual exclusion amount for the calendar year
  • Tuition or medical expenses you pay for someone (the educational and medical exclusions)
  • Gifts to your spouse
  • Gifts to a political organization for its use

In addition to this list, gifts to qualifying charities are never subject to gift taxes and are potentially deductible against income taxes.

If you give away more than the annual exclusion amount in cash or assets (for example, stocks, a house, a new car) to any non-spouse individual during the tax year, you will need to file a gift tax return in addition to your federal income tax return.

Yet even though gifts may be reportable, they are not necessarily taxable. In the U.S. tax code, the gift tax and the estate tax are unified. In other words, the IRS determines a taxpayer’s gift and estate taxes based on the cumulative transfers made by a taxpayer using one tax rate and one exclusion amount. We often call this unified credit “the lifetime exclusion.”

The federal gift tax return is Form 709 and although you need to file it for gifts above the annual exclusion amount, you will likely not owe any taxes because a taxpayer may charge taxable gifts against the lifetime exclusion, with any remaining lifetime exclusion available to his estate at death.

The lifetime estate and gift tax exclusion is $13.99 million per individual for 2025, up from $13.61 million in 2024. This increase means that a married couple can shield a total of $27.98 million without having to pay any federal estate or gift tax.

Only if you give more than the lifetime exclusion will your gift trigger federal gift tax.

As you can see, although Americans must report gifts above the annual exclusion amount, the vast majority of us will never pay taxes on those gifts.

Regardless, the annual exclusion amount is generally the benchmark affluent families use for their annual gifting.

We are always happy to advise and assist clients with gifting strategies, so please do not hesitate to contact us.

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