Is There a Gift Tax When Gifting to a Married Couple?

Giving financial gifts comes with tax implications, but the rules vary depending on the recipient. When gifting to a married couple, understanding how gift taxes apply is essential to avoid unexpected liabilities.

Certain provisions in U.S. tax law can reduce or eliminate gift tax burdens when giving to spouses or jointly to a couple. Understanding these rules helps maximize generosity while ensuring compliance with IRS regulations.

Gift Splitting

When gifting to a married couple, the IRS allows gift splitting, a strategy that effectively doubles the tax-free amount a donor can give. This provision lets a married donor treat a gift as if both spouses contributed equally, even if only one spouse provided the funds.

For example, if an individual gives $40,000 to their child and the child’s spouse, they can elect to split the gift with their own spouse. Instead of one person being responsible for the full amount, the IRS treats it as if each spouse contributed $20,000. This allows for greater flexibility in tax planning. However, both spouses must agree to the split, and the donor must file a gift tax return (Form 709) to report the election.

Marital Deduction

The unlimited marital deduction allows spouses to transfer assets to each other without incurring gift tax, provided the recipient is a U.S. citizen. This applies to both lifetime gifts and transfers at death, deferring potential estate or gift tax until the assets pass to a non-spouse beneficiary.

For example, if one spouse gifts $500,000 in cash or property to the other, they can claim the marital deduction, eliminating any immediate tax liability. However, if the receiving spouse is not a U.S. citizen, the IRS imposes an annual cap on tax-free gifts. In 2024, this limit is $185,000. Any amount exceeding this threshold is subject to gift tax unless covered by the donor’s lifetime exemption.

While the marital deduction allows tax-free transfers between spouses, it does not eliminate estate tax concerns. If a surviving spouse inherits substantial assets, their estate may be subject to taxation when passing wealth to heirs. Estate planning tools, such as trusts, can help minimize future tax exposure.

Annual Exclusions

The IRS allows individuals to give a certain amount each year to any number of recipients without incurring gift tax or using their lifetime exemption. In 2024, the annual exclusion is $18,000 per recipient.

For example, a parent can gift $18,000 to their child and another $18,000 to their child’s spouse, totaling $36,000 tax-free. If both parents contribute, this amount doubles to $72,000. Over time, this enables significant wealth transfers without reducing the lifetime exemption.

Certain gifts, such as direct payments for tuition or medical expenses, are not subject to the annual exclusion limit. Payments made directly to an educational institution or medical provider do not count toward the $18,000 limit and can be given in addition to other financial gifts. This allows donors to assist with major expenses while preserving other tax-free gifting opportunities.

Lifetime Exemption

Beyond the annual exclusion, the IRS provides a lifetime exemption that allows individuals to transfer substantial wealth without incurring gift tax. In 2024, this exemption is $13.61 million per person. Any gifts exceeding the annual exclusion count toward this exemption, reducing the amount available for shielding assets from estate tax upon death.

For example, if someone gifts $5 million during their lifetime, their remaining exemption for estate tax purposes would be $8.61 million. Because the exemption is unified with the estate tax, careful planning is necessary, particularly for individuals with assets expected to appreciate significantly.

Filing Requirements

When making gifts that exceed the annual exclusion or involve gift splitting, the IRS requires the donor to file Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return. This form reports taxable gifts and tracks the use of the lifetime exemption. The recipient has no tax obligations, but the donor must ensure compliance with reporting requirements.

Form 709 must be filed if an individual gives more than $18,000 to any one recipient in 2024 or elects to split a gift with their spouse. Even if no tax is due because of the lifetime exemption, the IRS requires documentation to track how much exemption has been used. The filing deadline is April 15 of the following year, though an extension can be requested.

Failure to report taxable gifts can result in penalties and interest, particularly if the omission is intentional. Proper recordkeeping is essential, as the IRS may review past filings to verify compliance. For individuals making large gifts as part of an estate planning strategy, consulting a tax professional can help ensure accurate reporting and maximize tax benefits.