Gift Tax: 2024 and 2025 Limits, Exclusions and How It Works

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Wondering if you’ll owe federal gift tax in 2025? You’re probably in the clear. Most people never pay the gift tax thanks to generous annual and lifetime exemptions.

Here’s the short version: You can give up to $19,000 per recipient in 2025 without even filing a form. Even if you give more, you typically don’t pay gift tax unless your total lifetime gifts exceed $13.99 million. And even then, only the excess is taxed at rates up to 40%.

This guide covers everything you need to know, including annual limits, lifetime exemptions, IRS Form 709 and how to avoid paying the gift tax altogether legally.

What Is the Gift Tax?

The gift tax is a federal tax on transfers of money or property where you don’t receive equal value in return. It’s paid by the giver, not the recipient. In most cases, you won’t owe any tax, but you might need to report larger gifts using IRS Form 709.

Quick Facts:

• The giver pays the tax, not the recipient.
• Gifts under the annual exclusion don’t need to be reported.
• Gifts above the exclusion require filing Form 709, but tax is only owed if you’ve exceeded your lifetime exemption.

Gift Tax Limits for 2024 and 2025

These amounts are indexed for inflation and adjusted by the IRS annually.

How Gift Tax Rates Work

The gift tax rate is progressive, starting at 18% and climbing up to 40%. But here’s the good news: these rates only apply after you’ve used your lifetime exemption.

Example: You gift $15 million in your lifetime. In 2025, with a $13.99 million exemption, you’d only pay gift tax on $1.01 million.

Reminder: Filing Form 709 doesn’t mean you owe tax — it just tracks how much of your exemption you’ve used.

2025 Annual Gift Tax Exclusion: How It Works

You can gift up to $19,000 per person in 2025 with no tax and no need to file Form 709. If you’re married, you can “split” gifts to give up to $38,000 per recipient.

Key Takeaways:

• Annual limit per recipient is $19,000 in 2025, up from $18,000 in 2024.
• Limit applies per person, per year
• Resets every calendar year
• Over the limit? File Form 709 — but you probably still owe $0

Lifetime Gift Tax Exemption (Unified Credit)

The lifetime exemption covers gifts above your annual limit. For 2025, it’s $13.99 million per person, or $27.98 million for married couples with the right planning.

If-Then Rule of Thumb:

• If your lifetime gifts < $13.99 million = No tax owed
• If your lifetime gifts > $13.99 million = Tax owed on the excess (up to 40%)

Important: This exemption is expected to drop by half in 2026 when the 2017 tax cuts expire. However, the IRS has confirmed there will be no clawback for gifts made before the change.

6 Smart Ways To Avoid Paying Gift Tax

Here’s how to gift generously without triggering tax:

• Stay under the annual limit ($19,000 in 2025)
• Split gifts with a spouse to double the annual exclusion
• Spread gifts over several years to use multiple exclusions
• Pay tuition or medical bills directly to the provider — unlimited and not reportable
• Use 529 plan “superfunding” to front-load five years of gifts (reportable, but not taxable)
• Make large gifts before 2026 to take advantage of the higher exemption

Real-Life Gift Tax Scenarios

Figuring out taxes can be complicated and frustrating. To help make the point, here are some examples:

Helping With a Down Payment

You gift your child $100,000 in 2025:

• First $19,000 is excluded
• Remaining $81,000 reported on Form 709
• Reduces your lifetime exemption, but no tax owed

Gifting Stock

You give your sibling stock worth $50,000:

• Report $31,000 (over the $19,000 limit)
• Reduces lifetime exemption
• Your sibling takes on your cost basis for future capital gains

Paying Tuition

You pay your grandchild’s school directly:

• Unlimited and not reportable — as long as it’s paid directly to the institution

When To File IRS Form 709

You must file Form 709 if:

• You gave more than $19,000 to one person in 2025
• You and your spouse split gifts
• You made future-interest gifts (like into some trusts)
• You’re using part of your lifetime exemption

What You’ll Need:

• Recipient’s name and relationship
• Fair market value of the gift
• Documentation or appraisals (if needed)
• Spousal gift-splitting statement
• Submit with your tax return (by April 15, or with an extension)

Gifting Strategies at a Glance

Final Take to GO: Should You Worry About Gift Tax?

Probably not.

With a $19,000 annual limit and a $13.99 million lifetime exemption in 2025, most people can give generously without paying a dime in gift tax. The top gift tax rate of 40% only applies to ultra-large gifts that exceed your remaining exemption.

Next Steps:

• Work with a CPA or estate planner to map out gifting strategies, especially before 2026
• Use direct payments for tuition or medical expenses to stay gift-tax-free
• File Form 709 correctly if you’re giving big this year

Caitlyn Moorhead and John Csiszar contributed to the reporting for this article.

Data is accurate as of July 28, 2025, and is subject to change.

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