We often get questions from our clients about gifting and the potential tax implications. A gift of money or property is not deductible on your personal income tax return nor does the recipient report the gift as income on his or her tax return. However, gifts may be subject to the federal gift tax. The gift tax is a tax on transfers of money or property to other people while getting nothing (or less than full value) in return.

Two Factors to Consider

Two factors determine how much you can give away before owing taxes on the gifted amount: the annual gift tax limit and the lifetime gift and estate tax limit. For 2024, the annual gift tax limit is $18,000, up from $17,000 in 2023. Since the exclusion amount is per recipient, this means that a married couple could give a married child and spouse up to $72,000 in 2024 without reducing their lifetime exemption. Gifts exceeding the annual limit should be reported on Form 709 but are not necessarily taxable.

Gifts over the annual threshold eat away at your lifetime estate tax exemption. Once your lifetime exemption is exhausted, you may begin to owe gift taxes. With the estate tax exemption at $13,610,000 per person in 2024, most taxpayers do not need to worry about paying estate and gift taxes. Keep your eye on the calendar though – beginning in 2026, the lifetime exemption is set to revert back to about half of current levels.

The following are not taxable gifts:

  • Gifts that are not more than the annual exclusion
  • Gifts consisting of direct payments to providers for medical and education expenses
  • Gifts to your spouse
  • Gifts to a political organization

As each person’s gifting scenario is different, please reach out to your tax advisor at KT to discuss your specific situation.