When it comes to receiving gifts, many people are relieved to learn that they don’t have to pay taxes on them. Gifts, in general, are not taxable for the recipient. However, the situation is a bit different for the person giving the gift, known as the donor.
Under current tax laws, a donor is only subject to gift taxes if they exceed the lifetime exclusion amount, which is nearly $14 million. For most people, this amount is far beyond what they would give away in a lifetime.
Even if a gift doesn’t reach the $14 million threshold, you might still need to file a gift tax return. For instance, if you give your son $50,000 for a down payment on a house, you must file a gift tax return for that year. This is because you need to maintain a record of all “taxable” gifts over your lifetime.
Not every gift requires reporting. Small gifts are exempt. The annual gift tax exclusion allows you to give away a certain amount each year without needing to report it. For 2025, this amount is $19,000. You can give $19,000 to as many people as you wish without having to file a gift tax return. For example, giving $19,000 to 100 different people would not require reporting.
Each individual can give $19,000 per recipient. A married couple can collectively give $38,000 to each child or any other recipient without needing to report it. This applies to anyone, including children, in-laws, and grandchildren.
Consider the earlier example of a $50,000 gift to a son. If one person gave the entire amount, they would need to report a $31,000 gift on their tax return. This is the $50,000 gift minus the $19,000 annual exclusion. Although no tax would be due, this amount would count against the donor’s nearly $14 million lifetime exclusion.
The large lifetime exclusion is set to decrease to around $7 million in 2026 unless new tax legislation is enacted. This change will be indexed for inflation.
Understanding these gift tax rules can help you make informed decisions about giving and ensure compliance with tax laws.
Associate Partner
Julie has over 20 years of experience in public and private accounting, representing varied clientele including the medical, legal, and real estate industries and trusts.
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