Rarely does anyone ever pay gift taxes. That’s right. You probably will never have to pay a gift tax. Ever! The IRS has many rules, and gifting is no exception, but the gift tax is one of the most misunderstood and most straightforward to avoid.
Many believe you can only give a certain amount each year without incurring gift taxes, which is true. You have an annual exclusion amount that you can give to as many people as you wish each year. An exclusion means it’s not even counted toward the gift tax calculation. In 2026 is $19,000.
However, even if you give ten people more than $19,000 in one year, unless you’ve given more than your total lifetime exemption amount of $15,000,000 (2026), there’s no gift tax owed. That’s a lot of zeros that you can gift.
Good news for anyone tracking this closely: the elevated lifetime exemption was originally scheduled to expire after 2025 and drop back to roughly $7 million per person. The One Big Beautiful Bill Act (signed in 2025) made the higher exemption permanent and pushed it even higher. That means the $15 million figure is here to stay, not a temporary window that closes on you
Here’s an example
You’re generous and give five family members $20,000 each. That’s $100,000, but you would have only used up $5,000 of your $15 million exclusion. Why only $5,000? Remember, the first $19,000 you gift each person yearly is excluded, so…
- $20,000(gift to each person) – $19,000 (annual exclusion per person) = $1,000 over the annual exclusion for each gift
- $1,000 x 5 family members = $5,000 total amount over the annual exclusion
- $15,000,000 (2026 Lifetime Exemption) – $5,000 (total amount over the annual exclusion) = $14,995,000
You still have $14.995 million left to gift over your lifetime
Don’t worry. It’s tied to inflation. So, if you want to give $15 million, you most likely will be able to give away a bit more in future years as the limit increases.
Remember, each year you can give $19,000 to any individual or individuals; those funds will never count toward your lifetime limit. So, in reality, you can gift much more than $14 million.
The gift-giving goodness keeps getting better…
The annual exclusion amount and lifetime exemption amounts are per individual. Couples can give $38,000 per individual ($19K each) per year, or more than $30 million ($15,000,000 for each spouse).
Some gifts don’t even count as gifts; those amounts are unlimited!
- Gifts to a spouse: As long as your spouse is a U.S. citizen, otherwise, different rules apply.
- Educational expenses: To qualify for the unlimited exclusion for qualified education expenses, the gift must be directly paid to the academic institution for tuition only. If your granddaughter goes to Penn State and you want to help with tuition, you must pay Penn State directly. Books, supplies, and living expenses do not qualify. Those expenses would fall into the $19,000 annual gift exclusion category.
- Medical expenses: Medical payments must be paid directly to the entity providing the care to qualify. The expenses that qualify include diagnosis, treatment, procedures, and transportation. Also included is the payment of premiums for medical or long-term care insurance.
While the rules are straightforward (at least, I think so), paperwork is involved. We are dealing with the IRS. The first thing to know is that the recipient does not pay the gift tax. The giver does.
The IRS wants to keep track of the gifts you give. If you make a taxable gift exceeding your $19,000 annual exclusion, you must file Form 709: U.S. Gift (and Generation-Skipping) Tax Return, due April 15.
Even if you don’t owe a gift tax because you have not reached the $13.99 million limit, you must still file this form. Remember, you must keep a copy for the rest of your life to document proof of the lifetime exemption.
Giving gifts has several consequences for the giver and the receiver, so please see an attorney, tax specialist, or your CERTIFIED FINANCIAL PLANNER(TM) professional. Creating a plan for any gifting in advance is the key.
If you enjoyed this post and know someone who wants to give you a gift, you can easily share it with them through any of the share buttons below! If you’re interested in gifting to charities, then check out our blog post about QCDs
