Gift Tax Calculator

IRC §2503(b) lets a donor give up to the annual exclusion to ANY individual donee per calendar year with no gift tax, no Form 709 filing, and no reduction of the lifetime exemption. The exclusion is $19,000 per donee for 2025 and $19,000 for 2026 (Rev. Proc. 2025-32 §3.43). A married couple can "split" gifts using §2513, effectively doubling each gift to $38,000 per donee in 2025 — but gift-splitting REQUIRES filing Form 709 even if no tax is owed. The exclusion is per DONEE per YEAR — a parent with three children can gift $57,000 total in 2025 without any return.

The unified federal estate and gift exemption (IRC §2010) is the cumulative lifetime amount you can transfer above the annual exclusion without owing tax. It is unified — every dollar of taxable gift during life reduces the exemption available at death. Current exemption (per person, per Rev. Proc. 2025-32): $13,610,000 for 2024, $13,990,000 for 2025, $15,000,000 for 2026. OBBBA §70106 (P.L. 119-1, July 2025) made the $15,000,000 base permanent — overriding the December 31, 2025 TCJA sunset that would have reverted to ~$7M. Married couples get DOUBLE exemption ($30,000,000 per couple in 2026) through portability (DSUE election on Form 706).

Form 709 (United States Gift (and Generation-Skipping Transfer) Tax Return) is REQUIRED — even if no tax is owed — when ANY of: (1) you gifted more than $19,000 to a single donee in 2025; (2) you made a "superfund" 5-year §529 election (§529(c)(2)(B)); (3) you elect to split gifts with a spouse under §2513 (both spouses must file); (4) you gifted a future interest (e.g., gift to a trust without Crummey powers); (5) you gifted property requiring valuation (closely-held stock, fractional interest in real estate, art). Due date: April 15 of the year AFTER the gift (Oct 15 with Form 8892 extension). Penalty for non-filing: 5% of tax due per month up to 25%, even if no tax is owed (failure-to-file penalty applies separately).

No — gift tax is a DONOR liability under IRC §2502. The recipient ("donee") owes nothing on receipt and the gift is not income (§102). However, two carry-forward consequences for the donee: (1) BASIS — donee's cost basis equals the donor's adjusted basis (§1015(a)) — meaning unrealized gains transfer with the gift, due on sale; (2) Any future income generated by the gifted property (rent, dividends, interest) becomes the donee's taxable income going forward. Important contrast: INHERITED property gets a §1014 stepped-up basis at the decedent's death — eliminating accumulated capital gains. Tax-aware estate planning often favors transferring high-basis property during life (1015 carryover doesn't matter) and low-basis property at death (1014 step-up wipes the gain).

Five exclusions never use exemption (IRC §2503(e), §2522, §2523): (1) UNLIMITED MARITAL DEDUCTION — gifts to U.S.-citizen spouse, no cap, no Form 709. Non-citizen spouse cap is $190,000 for 2025 (annual exclusion separately raised). (2) DIRECT TUITION payments to an educational institution — unlimited under §2503(e)(2)(A). Must be paid directly to the school; reimbursing the student doesn't qualify. (3) DIRECT MEDICAL payments to a provider — unlimited under §2503(e)(2)(B). Insurance premiums also qualify. (4) CHARITABLE GIFTS — unlimited deduction under §2522. (5) POLITICAL ORGANIZATIONS — §2501(a)(4) excludes outright. Note: §2503(e) tuition/medical exclusion is in ADDITION to the $19,000 annual exclusion — so a grandparent could pay $50,000 of tuition directly + give $19,000 cash to a grandchild same year, all without using lifetime exemption.

IRC §529(c)(2)(B) lets you treat one 529-plan contribution as if made over 5 years for gift-tax purposes — front-loading up to $95,000 per donee per donor in 2025 (5 × $19,000) or $190,000 from a married couple. The election is made on Form 709 and locks both donors out of further annual-exclusion gifts to that beneficiary for the 5-year window. Common use: grandparent superfunds $95,000 at the grandchild's birth, allowing 18 years of tax-free growth before college. Death within the 5-year window: the unused portion of the front-loaded gift is pulled BACK into the donor's estate (§529(c)(4)(B) clawback).

IRC §2503(b) annual exclusion applies ONLY to gifts of a PRESENT interest — the donee must have an immediate, unrestricted right to the property. A gift to an irrevocable trust (the donee being the trust beneficiary, not the trust itself) usually fails this — unless drafted with a "Crummey power" (Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968)). Crummey: beneficiary gets 30-60 days to withdraw the contribution; if they don't, it passes into the trust corpus — but the 30-day withdrawal window converts a future interest into a qualifying present interest. Standard estate-planning move for life-insurance trusts (ILITs) holding policies funded by annual gifts.

If gifts exceed both the annual exclusion AND the cumulative lifetime exemption, the excess is taxed at a flat 40% (IRC §2502 + §2001 rate table). Below the lifetime exemption, no actual tax is paid — but you must still file Form 709 to track the cumulative use. Each year's Form 709 reports lifetime exemption used to date (Schedule D), so the IRS can verify exemption at death (Form 706 estate-tax return). Lifetime exemption used is NOT refunded if you die with a lower exemption — but it doesn't have to be PAID back either; "clawback" was specifically rejected by Treas. Reg §20.2010-1(c).

Pre-OBBBA, the lifetime exemption was scheduled to SUNSET December 31, 2025 — reverting from $13.99M to ~$7M (the pre-TCJA $5M baseline indexed for inflation). OBBBA §70106 permanently set the baseline at $15,000,000 per person starting 2026, indexed for inflation thereafter. Practical impact: a married couple with portability now has $30,000,000 of combined transfer capacity, eliminating federal estate-tax exposure for ~99.9% of estates. Estates > $30M still face the 40% rate. State estate-tax thresholds (CT $13.6M, MA $2M, NY $7.16M, OR $1M, WA $2.193M) are unaffected — high-net-worth filers in those states still need state-level planning.

IRC §2601 applies a SEPARATE 40% tax on transfers to a "skip person" — a recipient 37.5+ years younger than the donor (typically grandchildren or further descendants). Each donor has a separate GST exemption equal to the lifetime exemption ($15,000,000 for 2026). Form 709 Schedule D allocates GST exemption to taxable distributions. Trust structures like dynasty trusts use the full GST exemption upfront to permanently shield generations of growth from §2601 — a key reason wealthy families use trusts to skip a generation.

(1) NOT FILING FORM 709 after a §529 superfund — even though no tax is due, the §6651 failure-to-file penalty applies. (2) Forgetting GIFT-SPLITTING REQUIRES BOTH spouses sign and file Form 709 — single-spouse signature invalidates the election. (3) Gifts to non-citizen spouses above the $190,000 2025 cap — no unlimited marital deduction. (4) §2503(e) tuition paid to STUDENT instead of SCHOOL — doesn't qualify, counts against annual exclusion. (5) Gifting APPRECIATED property — donee takes §1015 carryover basis; potentially better to hold for §1014 step-up at death. (6) Missing the §2511 deemed-gift on loans below the IRS Applicable Federal Rate — under-market loans imputed as gifts.