How Much Money Can You Gift Someone Tax Free?

A gift, as defined by the Internal Revenue Service (IRS), is a transfer of property or money to another person without receiving something of at least equal value in return. This concept covers transfers from cash to assets like stocks or real estate. The federal tax system has specific rules and thresholds that determine whether a gift has tax consequences for the person giving it. The recipient of a gift does not have to report it as income.

The Annual Gift Tax Exclusion

Each year, you can give a certain amount of money or property to any number of individuals without any tax consequences. For 2025, the annual gift tax exclusion is $19,000 per recipient. The exclusion is applied on a per-donor, per-recipient basis, meaning you can give up to $19,000 to your son, $19,000 to your niece, and $19,000 to a friend, all within the 2025 calendar year, without needing to file a gift tax return.

Through a provision known as gift splitting, a married couple can combine their individual annual exclusions to give up to $38,000 to a single recipient in 2025. For example, a couple could jointly give $38,000 to their child to help with a down payment on a house. Electing to split gifts requires the filing of a gift tax return, even if a return would not otherwise be required.

Gifts Exceeding the Annual Limit

Giving more than the annual exclusion amount to a single person in one year does not automatically trigger a tax bill. The federal tax system provides a lifetime gift and estate tax exemption, a unified credit that applies to gifts made during your lifetime and assets left in your estate. For 2025, this lifetime exemption is $13.99 million per individual.

When you give a gift that exceeds the annual exclusion, the excess amount is subtracted from your lifetime exemption. For instance, if you give a relative $50,000 in 2025, the first $19,000 is covered by the annual exclusion. The remaining $31,000 is then deducted from your $13.99 million lifetime exemption. You would only owe an out-of-pocket gift tax if your cumulative lifetime gifts surpass this multi-million dollar threshold.

To track the use of this lifetime exemption, you are required to file a gift tax return for any year in which you give more than the annual exclusion amount to any individual. This filing does not mean you owe tax; it is a record-keeping mechanism for the IRS. Under current law, the lifetime exemption amount is scheduled to sunset at the end of 2025 and revert to its pre-2018 level, estimated to be between $6 million and $7 million.

Payments Not Considered Taxable Gifts

Certain types of payments are exempt from the gift tax system, regardless of their amount. These transfers do not count against your annual exclusion or your lifetime exemption. Common examples are payments made for someone else’s tuition or medical expenses, which must be paid directly to the educational institution or the medical care provider to qualify.

If you give the money directly to the individual to pay their own tuition or medical bills, the payment is considered a regular gift and is subject to the annual exclusion rules. For example, writing a check for $30,000 directly to a university for a grandchild’s tuition is not a taxable gift. However, giving your grandchild a $30,000 check for them to pay the university would be a gift that exceeds the annual exclusion, requiring you to file a gift tax return.

Other transfers not subject to federal gift tax include gifts to your U.S. citizen spouse, which are unlimited. Gifts to certain political organizations for their use are also exempt.

Filing a Gift Tax Return

When you make a gift that exceeds the annual exclusion, you must report it to the IRS by filing Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return. The form is required even if no tax is due, as its purpose is to track the gifts that count against your lifetime exclusion amount.

To complete Form 709, you will need to provide specific information, including:

• Your own details (the donor)
• The recipient’s name, address, and relationship to you
• A clear description of the gift
• The gift’s fair market value on the date it was transferred

If you are splitting gifts with your spouse, both of you must file separate Form 709s and consent to the gift splitting on the other’s return.

The deadline for filing Form 709 is April 15 of the year following the year in which the gift was made, aligning with the standard income tax filing deadline. An extension to file your federal income tax return will also extend the time to file your gift tax return. Form 709 for the 2025 tax year can be filed electronically or by mail.