How Much Can One Person Give Another in a Year Without Taxes?

Giving money or assets to family and friends is a generous way to provide financial support, but tax rules determine how much can be given without triggering reporting requirements or taxes. The IRS sets limits on tax-free gifts, and exceeding these amounts may require additional paperwork or impact your lifetime exemption.

Understanding these limits helps avoid tax complications while maximizing what can be given freely.

Annual Gift Exclusion

In 2024, individuals can give up to $18,000 per recipient without triggering federal gift tax or requiring a gift tax return. This applies to cash, stocks, real estate, or other assets, provided the recipient has full control over the gift. There is no limit to the number of recipients.

Gifts exceeding $18,000 to a single person in a year must be reported on IRS Form 709. This does not necessarily mean taxes are owed—the excess amount simply counts toward the lifetime exemption.

Certain payments made directly to educational institutions for tuition or to medical providers for qualified expenses are not considered taxable gifts, regardless of the amount. To qualify, these payments must be made directly to the institution or provider.

Lifetime Allocation

Beyond the annual exclusion, the IRS provides a lifetime gift and estate tax exemption. In 2024, this exemption is $13.61 million per person. Gifts exceeding the annual exclusion count toward this limit, but taxes are only due if the total amount given surpasses the exemption.

This exemption applies to financial gifts and assets such as real estate, business interests, and valuable personal property. For example, gifting a vacation home worth $500,000 to a family member would reduce the lifetime exemption by $482,000 after applying the annual exclusion. These gifts must be reported on Form 709.

Estate planning strategies can help maximize this exemption while minimizing tax burdens. Some individuals transfer wealth gradually over several years to stay within the annual exclusion, while others use irrevocable trusts to remove assets from their taxable estate.

Gift Splitting

Married couples can combine their individual exclusions to give a larger amount to a single recipient without reducing their lifetime exemption. In 2024, each spouse has an $18,000 annual exclusion, allowing a couple to jointly give $36,000 to one person tax-free.

Even if the gift comes from one spouse’s assets, both must agree to split it and file IRS Form 709.

Gift splitting is particularly useful for transferring wealth to children or grandchildren. A couple helping their child with a home down payment, for example, can give $36,000 in one year without affecting their lifetime exemption.

Documentation

Proper record-keeping ensures compliance with IRS regulations. While gifts under the annual exclusion do not require formal reporting, maintaining records of the date, amount, and nature of the gift is advisable. For non-cash assets, appraisals can establish fair market value at the time of transfer.

For gifts exceeding the annual exclusion, IRS Form 709 must be filed to track the portion deducted from the lifetime exemption. If gifting business interests or shares in a privately held company, additional documentation—such as operating agreements or shareholder records—may be necessary.

Effects on Recipient

The giver is responsible for any gift tax implications, but recipients may still face financial consequences. Gifts are not considered taxable income at the federal level, so recipients do not need to report them. However, if the gift generates income—such as dividends from stocks or rental income from property—the recipient must pay taxes on that income.

Receiving a large gift can also affect eligibility for government benefits. Programs like Medicaid and Supplemental Security Income (SSI) have strict asset and income limits, and a significant gift could disqualify a recipient. Additionally, gifts received shortly before the donor’s death may be subject to estate tax if they are part of a taxable estate.

State-Level Factors

While federal tax laws govern most aspects of gifting, some states impose their own gift or inheritance taxes. Connecticut is the only state with a gift tax, requiring residents to file a state-level return if they exceed the exemption threshold. States like Iowa and Pennsylvania have inheritance taxes, meaning recipients—not donors—may owe taxes depending on their relationship to the giver.

State laws also impact Medicaid eligibility through look-back periods, which review financial transactions over a set number of years to prevent individuals from giving away assets to qualify for long-term care benefits. Most states have a five-year look-back period, meaning gifts made within that timeframe could result in penalties or delays in receiving Medicaid assistance.

Given these variations, individuals making substantial gifts should consult a tax professional to ensure compliance with both federal and state regulations.