How Much Money Can I Give My Child Per Year?

Understanding the financial guidelines for gifting money and assets to children is helpful for parents and family members. These guidelines help ensure support is provided effectively while navigating tax implications.

The Annual Gift Tax Exclusion

The annual gift tax exclusion allows an individual to give a certain amount of money or property to another person each year without incurring federal gift tax implications or needing to report the gift to the IRS. For 2025, this exclusion is $19,000 per recipient. This means a donor can give up to $19,000 to each child, and to any number of other individuals, without triggering reporting requirements.

The exclusion applies per recipient, not as a total amount given by the donor. For example, a parent could give $19,000 to one child and $19,000 to another in the same year, and neither gift would be subject to reporting. Married couples can combine their exclusions, allowing them to give up to $38,000 to each recipient in 2025 without reporting. This joint gifting requires filing IRS Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return, even if no tax is owed.

If a gift exceeds the annual exclusion, the donor must file Form 709 to disclose the transfer. Filing this form does not automatically mean gift tax is owed. The amount exceeding the annual exclusion reduces the donor’s lifetime gift tax exemption. The recipient of the gift typically does not pay income tax on the amount received.

The Lifetime Gift Tax Exemption

When gifts exceed the annual exclusion, the excess reduces the donor’s lifetime gift tax exemption. This exemption, also known as the unified gift and estate tax exemption, represents the total amount an individual can give away during their lifetime, beyond the annual exclusion, or leave to heirs at death, without incurring federal gift or estate tax. For 2025, the lifetime exemption is $13.99 million per individual.

For example, if a parent gives a child $25,000 in 2025, the first $19,000 is covered by the annual exclusion. The remaining $6,000 reduces the parent’s $13.99 million lifetime exemption. Form 709 must be filed to report this excess. Actual gift tax is only paid if total cumulative taxable gifts made over a lifetime, plus the value of the donor’s estate at death, exceed this exemption.

The lifetime gift tax exemption is a unified credit, applying to both gifts made during life and assets transferred at death. Any portion used for lifetime gifts reduces the amount available to shield an estate from federal estate taxes. This exemption is also portable between spouses, potentially allowing a married couple to protect up to $27.98 million from federal gift and estate taxes.

Specific Giving Scenarios

Certain payments for education and medical care can be made without counting against the annual gift tax exclusion or lifetime exemption. These are known as qualified transfers and offer additional ways to provide financial support.

Qualified Educational Expenses

Payments made directly to a qualifying educational institution for a student’s tuition are excluded from gift tax. This applies to tuition costs for full-time or part-time students. This exclusion applies only to tuition paid directly to the school. Payments for other educational costs, such as books, supplies, or room and board, do not qualify for this unlimited exclusion. If a donor gives money directly to the student for tuition, it is considered a taxable gift subject to annual exclusion rules.

Qualified Medical Expenses

Payments made directly to a medical care provider for an individual’s medical expenses are also excluded from gift tax. This includes costs for diagnosis, cure, mitigation, treatment, or prevention of disease, and payments for medical insurance. The payment must go directly to the healthcare provider or insurance company, not to the individual receiving care, to qualify for this unlimited exclusion.

529 College Savings Plans

Contributions to a 529 plan are considered gifts for tax purposes and are subject to the annual gift tax exclusion. Donors can elect to “front-load” contributions, allowing an individual to contribute up to five times the annual exclusion amount in a single year. This gift is treated as if it were made evenly over a five-year period. For 2025, this means a single donor could contribute up to $95,000 to a 529 plan for a beneficiary and spread it over five years, without using their lifetime exemption, provided no other gifts are made to that beneficiary during that period. Married couples can double this amount to $190,000. Filing Form 709 is required to elect this five-year averaging.

Implications for the Child

When a child receives a gift of money or assets, it is generally not considered taxable income for federal income tax purposes. The gift tax is typically the responsibility of the donor, not the recipient. Therefore, the child usually does not need to report the gift as income on their tax return.

However, receiving significant gifts can affect a child’s eligibility for need-based financial aid for college, particularly as it relates to the Free Application for Federal Student Aid (FAFSA). Assets held directly in the student’s name are assessed at a higher rate than parent-owned assets in financial aid calculations. If a gift is given directly to a student and remains in their account when the FAFSA is filed, it will be counted as a student asset.

Income received by the student, including cash gifts, can also impact financial aid eligibility. While the FAFSA uses income information from two years prior, assets are reported as of the date the application is filed. A gift received by a student can be counted as untaxed income on a future FAFSA. To potentially minimize the impact on financial aid, strategies include giving gifts to parents rather than directly to the student, or timing gifts to occur after the FAFSA is filed and the funds are spent before the next filing period.