Take advantage of the lifetime gift tax exclusion
As mentioned earlier, the lifetime gift tax exclusion is $12.92 million in 2023. This means that you can give gifts up to $12.92 million over your lifetime without owing any gift tax. One penny over the exclusion makes it a taxable gift, but rarely will tax be owed.
For example, IRS rules on gifting money to family in 2024 stipulate that you can gift up to $18,000 to any one person over the course of the year without having to report the gift to the IRS. This is called the gift tax exclusion, and the amount is subject to change every year.
Bottom Line. California doesn't enforce a gift tax, but you may owe a federal one. However, you can give up to $19,000 in cash or property during the 2025 tax year and up to $18,000 in the 2024 tax year without triggering a gift tax return.
Gift tax is paid by the giver of money or assets, not the receiver. The good news is that this threshold is so high that few people end up having to pay the gift tax. These thresholds are referred to as exclusions.
If your home is valued at the allowed price or less, you may gift it to your children. As a rule, if you are gifting property valued at more than $14,000 in any one year, you must file a gift tax form, unless the recipient is your spouse. Keep in mind, this price applies to individuals.
Generally, a person receiving a gift from their family does not have to pay gift tax until a donation exceeds $18,000 (this amount increases to $19,000 in 2025). A gift tax is a government tax imposed on those who give money or property to others in exchange for nothing (or less than total value).
Paying someone else's medical expenses is categorized as a qualified transfer—or in other words, a “non-gift” gift. This means that the IRS allows you to make this type of gift without incurring the federal gift tax or the federal generation-skipping transfer tax (GSTT).
What Can Trigger a Gift or Estate Tax Audit? Here are some of the common factors that can lead to gift or estate tax audits: Total estate and gift value: Generally speaking, gift and estate tax returns are more likely to be audited when there are taxes owed and the size of the transaction or estate is relatively large.
No, you do not have to report money you receive as a gift as income. While any gift may be taxable, the recipient of the gift does not have to pay the gift tax. And the person who gives you the gift only needs to file a gift tax return if it's more than the $18,000 annual exclusion.
From this perspective, if you are inclined to give, you should gift as much as you can comfortably afford during your lifetime, while remaining aware of the available step-up in capital gain basis for inherited assets. So, gift your assets that have minimal gains and save your most appreciated assets for inheritance.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income.
For 2024, the annual gift tax limit is $18,000. (That's up $1,000 from last year's limit since the gift tax is one of many tax amounts adjusted annually for inflation.) For married couples, the combined 2024 limit is $36,000.
Generally, the answer to “do I have to pay taxes on a gift?” is this: the person receiving a gift typically does not have to pay gift tax. The giver, however, will generally file a gift tax return when the gift exceeds the annual gift tax exclusion amount, which is $18,000 per recipient for 2024.
Another key difference: While there is no federal inheritance tax, there is a federal estate tax. The federal estate tax generally applies to assets over $13.61 million in 2024 and $13.99 million in 2025, and the federal estate tax rate ranges from 18% to 40%.
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).
Parents and other family members who want to pass on assets during their lifetimes may be tempted to gift the assets. Although setting up an irrevocable trust lacks the simplicity of giving a gift, it may be a better way to preserve assets for the future.
Use the annual gift tax exclusion.
Each year, you can give a certain amount of property to a family member without incurring gift taxes. As of 2024, the annual gift tax exclusion is $18,000 per recipient. This means you can gradually transfer property over several years to minimize tax liabilities.
Many people who are worried about what will happen to their home when they die ask us whether it would be better to simply add their child's name to their deed. We caution against adding your child to your deed and, in almost all cases, recommend including them in your will instead.
The primary way the IRS becomes aware of gifts is when you report them on form 709. You are required to report gifts to an individual over $17,000 on this form. This is how the IRS will generally become aware of a gift.
Yes, your parents can gift you $100,000 for a house — but they'll have to file a gift tax return to disclose the gift since it exceeds the IRS exclusion amount of $18,000. Filing a return doesn't necessarily mean they'll automatically have to pay taxes.
That depends. She would need to file Form 709 if the check amount is more than the annual gift tax exclusion amount — that limit is $18,000 per recipient for 2024. If the amount is below the threshold for a specific year, then she will not be required to report the gift on tax form 709.