How Does the Annual Gift Tax Exclusion Work?
You can give up to $18,000 per recipient in 2024 — $36,000 for married couples who split gifts — without filing a gift tax return or reducing your lifetime exemption. If you give more than the annual exclusion to any one person, you must file Form 709 and the excess counts against your lifetime unified estate and gift tax exemption.
What Transfers Are Exempt From Gift Tax?
Gifts to a U.S. citizen spouse are unlimited and fully exempt. Gifts to qualifying charities are deductible. Payments made directly to educational institutions for tuition or directly to medical providers for care on someone's behalf are completely excluded from gift tax with no dollar limit — they do not even count against the annual exclusion.
Does the Recipient of a Gift Pay Tax on It?
No. Gift taxes are the responsibility of the donor, not the recipient. The recipient does not report the gift as income and owes no tax on it. However, when the recipient later sells gifted property, they inherit the donor's cost basis, which may result in capital gains taxes on appreciation that occurred while the donor held the asset.
Frequently asked questions
What happens when I use my gift tax lifetime exemption?
Every dollar of taxable gifts above the annual exclusion reduces your lifetime estate and gift tax exemption dollar-for-dollar. When you die, any remaining exemption shelters your estate from estate tax. If you exhaust the exemption during your life, gifts above it are taxed at rates up to 40% in the year given.
Do I need to file a gift tax return for every gift?
No. You only need to file Form 709 if you give any one person more than the annual exclusion amount in a calendar year, make gifts of future interests, or elect to split gifts with your spouse. Gifts below the annual exclusion per recipient require no reporting.