Annual Gift Tax Exclusion
Authority: IRC §2503(b)
The annual gift tax exclusion is the amount one person can give to any other person each year with no gift tax, no gift tax return, and no use of the lifetime exemption: $19,000 per recipient for 2025, indexed in $1,000 steps. The exclusion is per donor, per recipient, per year, so a married couple can jointly give $38,000 to each child, each child's spouse, and each grandchild annually, moving substantial wealth with zero paperwork. Gifts above the exclusion are not usually taxed either; they simply require Form 709 and chip away at the lifetime estate and gift exemption, which the 2025 tax legislation set at $15,000,000 per person beginning in 2026. Unlimited additional amounts can be paid tax-free directly to schools for tuition and to medical providers for care. Recipients never owe income tax on gifts, but gifted appreciated property carries over the donor's basis, unlike inherited property, which gets a step-up.
Example
Grandparents with three married children and six grandchildren give $19,000 each to twelve family members. That moves $456,000 out of their estate in one year (using both spouses' exclusions), with no returns filed and no exemption used.
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