Gift Tax
A federal tax on transfers of money or property to another person when you receive nothing (or less than full value) in return. The donor — not the recipient — is responsible for paying the gift tax.
The federal gift tax applies to transfers of money or property where you give something of value and receive less than its fair market value in return. It is the donor (the person giving the gift) who is responsible for reporting and, if applicable, paying the gift tax — not the recipient. Gifts between spouses who are US citizens are entirely exempt from gift tax.
The gift tax works in conjunction with an annual exclusion and a lifetime exemption. For 2025, you can give up to $19,000 per recipient per year (the annual exclusion) without any gift tax consequences and without needing to file a return. Gifts to any single person exceeding this amount require filing Form 709, though tax is rarely owed because the excess uses up part of your lifetime unified credit.
The lifetime gift and estate tax exemption is $15,000,000 per individual for 2026 (OBBBA made this base permanent starting 2026, indexed for inflation thereafter), $13,990,000 for 2025, and $13,610,000 for 2024. Taxable gifts (those exceeding the annual exclusion) reduce this lifetime exemption dollar for dollar. Only after exhausting the entire lifetime exemption does any gift tax become payable, at a top rate of 40%. Most individuals will never owe gift tax due to the generous exemption.
How it works
The federal gift tax applies whenever you transfer money or property and receive less than full value in return, and it's the donor — not the person receiving the gift — who is responsible for reporting and, if it ever comes due, paying it. Gifts between spouses who are both US citizens are entirely exempt, no matter the amount. The tax works alongside two separate protections: the annual exclusion, which is $19,000 per recipient for 2025, and a much larger lifetime exemption.
Once a gift to any one person in a year exceeds the $19,000 annual exclusion, the donor must file Form 709 reporting the excess, but that rarely means actual tax is owed — the excess simply reduces the donor's lifetime exemption instead. That lifetime exemption is $15,000,000 per individual for 2026 (made permanent at that level by OBBBA), up from $13,990,000 in 2025 and $13,610,000 in 2024. Only once the entire lifetime exemption has been used up does gift tax actually become payable, at a top rate of 40%.
Because the gift and estate systems share one lifetime exemption, large lifetime gifts reduce what's left to shelter your estate at death — this is the link to the unified credit. Payments made directly to a school or medical provider for someone's tuition or medical expenses are excluded from gift tax entirely, on top of the annual exclusion, which is a commonly overlooked way to help family members without touching either allowance.
Example: a gift above the annual exclusion
You give your adult daughter $30,000 in 2025 to help with a down payment. The first $19,000 is covered by the annual exclusion and has no reporting requirement at all.
The remaining $11,000 exceeds the exclusion, so you must file Form 709 for the year. No tax is due, though — the $11,000 simply reduces your $13,990,000 lifetime exemption to $13,979,000, leaving that much still available to shelter future gifts or your estate.
Quick Gift Tax Check
2025 tax year2025 annual exclusion: $19,000 per recipient
Frequently asked questions
Who pays the gift tax, the giver or the receiver?
Do I owe gift tax if I give someone more than $19,000?
Is there a gift tax on money I give to my spouse?
Related Terms
Annual Gift Tax Exclusion
The amount you can give to any individual each year without gift tax consequences or filing requirements. For 2025, the annual exclusion is $19,000 per recipient.
Estate Tax
A federal tax on the transfer of property at death. The taxable estate is the fair market value of all assets at death minus allowable deductions. The 2026 exemption is $15,000,000 (OBBBA permanent) — up from $13,990,000 in 2025.
Unified Credit
A lifetime tax credit that offsets gift and estate taxes. It shelters $15,000,000 in cumulative taxable gifts and estate value from federal transfer taxes in 2026 (OBBBA permanent), up from $13,990,000 in 2025.