How much money can you gift tax-free?

A cash gift can be a nice surprise on a special occasion. Or a lifeline in a time of need.

But did you know that exceeding certain limits might require you to file a gift tax return? In some cases, you may even have to pay more in taxes.

Knowing the ins and outs of tax-free gifting can help you minimize your tax burden when supporting the people closest to you. Nobody wants a surprise tax bill or to have to fill out even more paperwork come tax time.

Learning the relevant US tax laws, especially if you’re considering gifting large sums, can save you time and money.

But don’t worry. It’s not as complicated as it sounds. This guide will get you up to speed on tax-free gifting, including exactly how much money you can gift tax-free and the tax implications for you (and your loved ones).

What is the gift tax?

The gift tax is a federal government tax covering the transfer of money or property from one person to another. It can apply to parents giving money to their children, the gift of a house or a car, and other similar transfers.

What are the gift tax limits?

Gift taxes only have the potential to kick in when gift values exceed limits set by the US Internal Revenue Service (IRS). And even then, you still might not have to pay anything if you haven’t surpassed the lifetime gift tax exclusion. But you will have to report excess annual contributions to the IRS by filing an additional tax form (Form 709).

So, what are these limits? Well, the IRS updates them annually. For the 2024 tax year, you can give up to $18,000 to any individual over the course of the year without having to report it to the IRS. This limit is up from $17,000 in 2023. The lifetime gift tax exclusion is $13.61 million for the 2024 tax year.

Pro tips: If you intend to shower loved ones with high-value gifts, you might want to consult the IRS Gift Tax FAQs to ensure you don’t create an unintended tax liability headache. And always consider consulting with a tax professional to ensure you don’t face any unexpected tax hits.

What is considered a gift?

Gifting can take many forms. It might mean assisting a loved one with rent, contributing to their down payment on a home, or gifting money as a wedding present.

The IRS defines a gift as any transfer of money, property, or assets where the giver does not receive something of equal value in return. Specific examples of what the IRS considers a gift include:

• Cash gifts
• Transferring ownership of real estate or stocks
• Forgiving a debt
• Providing the use of property or income-producing assets without charging the market rate

What gifts are safe from taxes?

Several types of gifts are generally “safe” from federal gift taxes. Here’s a quick rundown to help you understand how much money you can gift tax-free:

• Gifts to your spouse are generally tax-free, with no limit on the amount (provided you are both US citizens).
• Gifts to qualified charities and registered nonprofit organizations are not subject to gift taxes.
• Gifts to political organizations, political parties, or candidates are protected by the First Amendment and not subject to gift taxes.
• Education and medical expenses are not subject to gift taxes. That means you can pay for someone’s tuition or medical expenses without tax implications. Just make sure the payments go directly to the educational institution or medical provider.

We’re going to issue this reminder several times throughout this piece but remember: It’s always a good idea to consult with a tax professional to ensure you’re staying within the law while taking advantage of tax-free gifting opportunities.

Who pays the gift tax?

In the United States, the person giving a gift is typically responsible for paying any applicable gift taxes.

It’s worth noting that most gifts are not subject to tax due to the annual exclusion limit and lifetime exemption. Remember, in 2024, only gifts that reach the following limits are potentially subject to gift taxes:

• $18,000 per individual recipient, as per the annual gift tax exclusion
• $13.61 million, as per the lifetime gift tax exemption

If you are wondering how much money you can be gifted tax-free, you can rest assured. Only in rare cases does the recipient of a gift become liable if the giver fails to pay taxes owed.

To avoid penalties or legal consequences, it’s essential to understand and comply with IRS regulations on taxation and gifts. If you have further questions or concerns, it’s a good idea to consult with a tax professional before acting.

How does the annual gift tax exclusion work?

Staying under the annual gift tax exclusion means you don’t need to worry about paying gift tax on the Christmas, birthday, and other presents you buy every year.

The IRS allows you to gift up to $18,000 in money or property to an individual each year without having to report it to the IRS (for the tax year 2024). Even if your gifts exceed $18,000, it’s still unlikely you’d have to pay taxes unless you’ve surpassed the lifetime gift tax exclusion ($13.61 million in 2024).

If you’re married, you and your spouse can each gift up to $18,000 to any one recipient, bringing the total to $36,000 per recipient.

Note: Giving one person more than $18,000 in a year requires you to file Form 709 on your taxes in 2025. You may also have to pay taxes on it at tax rates ranging from 18% up to 40%, typically only if you’ve exceeded your lifetime gift tax limit.

To go deeper into the intricacies of gift tax regulations, you can check out the IRS FAQs or consult your tax professional.

What are the lifetime gift tax limits?

The lifetime gift tax limit (also known as the lifetime gift tax exemption) is the total amount of money you can gift to family members and others, tax-free.

As of 2024, this limit is set at $13.61 million per person over their lifetime. And because it’s per individual, married couples can double that amount in lifetime gifts. Any gifts above this threshold are then subject to taxes.

However, most taxpayers do not reach the gift tax limit of $13.61 million over their lifetimes. So, if you’re in that position, it’s not the worst issue to have.

When planning large cash gifts, it’s crucial to consider the lifetime gift tax limit. This minimizes tax implications and ensures compliance with IRS rules. Staying within the exemption limit lets you transfer substantial wealth to your loved ones tax-free. This provides financial security and support for future generations.

What is the gift tax rate?

The gift tax rate in the United States ranges from 18% to 40%, depending on the amount. The gift tax applies only to gifts worth more than the annual exclusion limit of $18,000 per recipient.

However, taxpayers typically don’t pay gift tax unless they have given away more than the $13.61 million lifetime exclusion limit.

Here’s a quick look at the different tax rates by gift amount:

Gift Value	Tax Rate
Up to $10,000	18%
$10,001 to $20,000	20%
$20,001 to $40,000	22%
$40,001 to $60,000	24%
$60,001 to $80,000	26%
$80,001 to $100,000	28%
$100,001 to $150,000	30%
$150,001 to $250,000	32%
$250,001 to $500,000	34%
$500,001 to $750,000	37%
$750,001 to $1,000,000	39%
More than $1,000,000	40%

Source: Internal Revenue Service

There are also various exceptions and rules for calculating gift taxes. The instructions for the IRS Form 709 can help you define exactly how much money you can gift tax-free. And again, don’t hesitate to reach out to a tax professional for advice.

How to gift money

Here are seven key strategies that can enable you to give generously without incurring tax liabilities:

1. Know your limits: Use the annual gift tax exclusion of $18,000 per person to gift money to as many individuals as you want without facing potential gift taxes.
2. Use exemptions: Take advantage of the $13.61 million lifetime gift tax exemption to transfer substantial wealth to loved ones.
3. Combine strategies: Balancing the annual exclusion and the lifetime exemption is another way to maximize tax-free gifts over time.
4. Split the gift: If you’re married, you and your spouse can each give $18,000 to a single recipient, effectively doubling the annual exclusion to $36,000 per person.
5. Spread it out: Consider spreading out larger gifts over multiple years to stay under the annual exclusion limit.
6. Support education or medical needs: Direct payments to educational institutions or medical providers are exempt from gift taxes.
7. Stay informed: Keep up to date on any changes to gift tax laws and consult a tax professional to ensure you’re maximizing the tax-free gifting strategies available to you.

These strategies can help you understand how much money you can gift tax-free to minimize the tax implications of your generosity.

Gifting money is now simpler than ever

With Western Union, you can gift money online with just a few taps on your screen.

Whether you’re covering your niece’s dance lessons, assisting a child with rent or tuition, or celebrating your dad’s retirement, the possibilities for gifting are endless.

You can send money with the Western Union mobile app, or from hundreds of thousands of agent locations worldwide.

So why wait? Make someone’s day and send them a gift they may never forget.