Many parents and grandparents give their children and grandchildren monetary gifts during the year. They may give them money for a down payment on a home, to buy a car, or to help them out in other ways. But when are these gifts of taxable importance? The respected estate planning lawyers at Skeeters, Bennett, Wilson & Humphrey want to make sure you know the specifics of gifts, associated taxes, and exclusions.
When You Don’t Have to Pay Gift Tax
According to the Internal Revenue Service (IRS), in 2025, a person could give gross gifts of $19,000 or less to another individual with no tax effect. There are no reporting requirements, nor do you have to file a gift tax return. If your spouse joins in the gift, then the allowable gift amount increases to a maximum of $38,000 for a recipient. This status applies to each donee: for example, if you want to give each of your three children a monetary gift each year of say, $10,000, you’ll have no tax effect on each individual gift.
| Year of Gift | Annual Exclusion per Donee |
|---|---|
| 2011 through 2012 | $13,000 |
| 2013 through 2017 | $14,000 |
| 2018 through 2021 | $15,000 |
| 2022 | $16,000 |
| 2023 | $17,000 |
| 2024 | $18,000 |
| 2025 | $19,000 |
Keep in mind that as IRS regulations change, so does the annual allowable gift amount. Always confirm it with your tax advisor before issuing a monetary gift to a donee. But as long as your gifts don’t exceed the IRS's maximum annual exclusion per individual for a specific calendar year, you’re not obligated to pay a gift tax.
This benefit applies to spouses as well. Spouses can give an unlimited amount of money to each other under the gift tax marital deduction rules, and there are no gift tax forms to be filed or any gift tax to be paid. To be eligible for the 100 percent marital deduction concerning gifts, the spouse must be a U.S. citizen.
Payments of medical expenses and tuition payments are also excluded from federal gift tax requirements. Contributors to a qualified tuition program that exceed the maximum annual exclusion gift amounts may treat the gift as if it had been made over a five-year period. For example, instead of only gifting $19,000 for tuition expenses in 2025, another $19,000 next year, and so on, you’d be allowed an $85,000 exclusion in any one year—a one-time maximum exclusion aggregate gift amount. This, too, depends on the IRS guidelines for maximum exclusions in any given year.
When You Might Have a Gift Tax Obligation
If you make a gift, or a combination of gifts, to any one person in a single year that exceeds the IRS’s annual exclusion amount, you are required to file a federal gift tax return (Form 709). However, filing a gift tax return does not necessarily mean you will owe any gift tax.
This is because of the unified gift and estate tax exemption, which allows you to give away a significant amount during your lifetime and at death without actually paying federal gift or estate taxes. The federal gift tax rates are the same as the federal estate tax rates and can change from year to year, but the exemption shelters gifts beyond the annual exclusion amount up to a cumulative lifetime limit.
Strategically using the annual exclusion and the unified exemption can help reduce or even eliminate future estate taxes. Partnering with a knowledgeable attorney can help ensure your gifts are structured thoughtfully, in line with your broader estate planning goals.