If you plan to give a family member or friend more than $19,000 this year, it helps to know how the federal gift tax rules apply. In most cases, a gift above $19,000 to one person requires a gift tax return, and gift tax becomes due only after your lifetime taxable gifts exceed $15 million. Here's how the annual limit and the lifetime exemption work together.
How Much Can I Give Each Person This Year?
This year, each person can give up to $19,000 to any one recipient during the calendar year, and the full amount is covered by what the IRS calls the annual exclusion. Your lifetime exemption stays at its full amount for these gifts. The exclusion applies separately to each person you give to, so you could give $19,000 to each of your children and each of your grandchildren in the same year.
Married couples can each give $19,000 to the same person, for a combined $38,000 per recipient. When the full combined amount comes from one spouse's separate funds, the couple makes this election, known as gift splitting, on a gift tax return.
The exclusion resets on January 1, so each calendar year brings a new annual exclusion for every recipient. The IRS adjusts the annual exclusion and the lifetime exemption for inflation each year, and the figures in this article reflect the current limits.
Tuition you pay directly to a school on someone's behalf and medical expenses you pay directly to a provider are excluded from gift tax regardless of the amount.
Do I Owe Gift Tax If I Give More than $19,000?
In most cases, the gift tax due is zero. Gift tax generally becomes due only after your total lifetime taxable gifts exceed your exemption, which is $15 million per individual this year or $30 million for a married couple. Until then, the amount you give one person above $19,000 in a year is subtracted from that exemption.
Suppose you give your daughter $50,000 this year. The first $19,000 is covered by the annual exclusion, and the remaining $31,000 is reported to the IRS and subtracted from your lifetime exemption. The gift tax due on this transfer is zero.
The lifetime exemption is shared between gifts you make during your life and assets you leave at death. Any exemption you use for gifts today reduces the amount available to your estate later, so gifting decisions and estate planning are best reviewed together.
Filing a Gift Tax Return
Gifts above the annual exclusion are reported on IRS Form 709, the federal gift tax return, and the person making the gift is responsible for filing it. The return is generally due April 15 of the year after the gift. An extension on your income tax return also extends the deadline for Form 709.
Filing creates an official record of how much of your lifetime exemption you have used. Your executor and tax advisors will use that record when settling your estate.
Talk with Your Advisor before You Give
Gifts completed by December 31 count toward that year's annual exclusion. A gift made by check is generally treated as complete once the recipient deposits or cashes it, so sending a check early in December gives the recipient time to deposit it before year-end.
If a larger gift is part of your plans, contact your Johanson & Yau advisor before making the transfer. We can review the reporting requirements with you and discuss how the gift fits within your broader estate plan.
Frequently Asked Questions
Does the Person Receiving a Gift Pay Gift Tax?
The person making the gift is responsible for filing any required gift tax return and paying any gift tax due. Gifts are also generally excluded from the recipient's taxable income.
How Much Can a Married Couple Give One Person This Year?
A married couple can give up to $38,000 to one person this year by combining their two $19,000 annual exclusions. When the full amount comes from one spouse's separate funds, the couple elects gift splitting on a gift tax return.
When Is a Gift Tax Return Due?
Form 709 is generally due April 15 of the year after the gift. An extension on your income tax return also extends the gift tax return deadline.
Do Tuition Payments Count toward the $19,000 Limit?
Tuition you pay directly to a school on someone's behalf is excluded from gift tax regardless of the amount, and the same applies to medical expenses paid directly to a provider. Money given to a student to pay their own tuition counts toward the $19,000 annual exclusion.
Can I Give $19,000 to More than One Person?
The annual exclusion applies to each recipient separately, so you can give up to $19,000 to as many people as you like each year.