Givers, not receivers, pay the federal gift tax, but you can give away up to $13.61 million in cash or other assets during your lifetime (tax year 2024) without triggering the gift tax.
If you're still a dependent of your parents and they're paying for your higher education--room and board for example--this isn't considered a gift. A transfer of $100,000 to you directly is considered a gift and may be taxable to the giver.
You must submit a gift tax return if you present more than $15,000 in cash or assets (for example, stocks, land, or a new automobile) to any one individual in a year. This condition does not imply that you must pay a gift tax. It simply means you must complete IRS Form 709 to report the gift.
For 2021, you can forgive up to $15,000 per borrower ($30,000 if your spouse joins in the gift) without paying gift taxes or using any of your lifetime exemption. (These amounts are the same as in 2020.) But you will still have interest income in the year of forgiveness. Forgive (don't forget).
Legally, you can gift a family member as much as you wish. However, there may be tax implications if the amount exceeds your annual exemption. Not every gift will be subject to tax and whether tax will need to be paid will depend on who you give money to and how much money is given.
Lifetime IRS Gift Tax Exemption
If a gift exceeds the $19,000 limit for 2025, that does not automatically trigger the gift tax. For 2025, the IRS allows a person to give away up to $13.99 million in assets or property over the course of their lifetime and/or as part of their estate.
$1 Million In Ordinary Income
For example, if you're single and earn $1 million in taxable income, you'll fall into the highest tax bracket, which is currently 37%. This means that you'll pay 37% in federal income taxes on the portion of your income that exceeds the threshold for the highest tax bracket.
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.
It's not inherently illegal to pay someone a lot of money, and do it by check. But it sure does raise suspicion of illegality. People don't randomly give large amounts of money to one other.
Some examples of goals you may want to use this money for include retiring the way you want, paying off your debt, or purchasing a new home.
The $100,000 Loophole.
With a larger below-market loan, the $100,000 loophole can save you from unwanted tax results. To qualify for this loophole, all outstanding loans between you and the borrower must aggregate to $100,000 or less.
If you want to give hefty gifts to your loved ones without worrying about paying a gift tax, you should give something that doesn't exceed the annual credit of $18,000. The good news is that the limit is set per person, and you can pay the same amount to another person in the same year without filing the return.
If you lend the money at no interest, the IRS can consider the loan a gift, making you liable for gift taxes. The repayment schedule that the borrower must follow. State whether you'll require periodic payments, a balloon payment or some combination.
A check or money order provides a secure way to give money. Your gift can be tracked and voided if lost or stolen, which offers an added layer of safety. Another benefit is the convenience. You can write a check from your bank account and money orders are widely available at banks, retail stores and more.
“Gifts” can be made in cash or other assets – securities, closely held business interests, real estate, artworks, collectibles or any other type of property. So long as the total market value of your gifts does not exceed $18,000 per recipient in a calendar year, the transfers are entirely gift tax-free.
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.
Amounts that exceed these limits are treated as deprived assets for five years from the date deprivation occurs. *$1,000 exceeds the $10,000 per financial year limit and is deprived.
A gift letter is a formal document proving that money you have received is a gift, not a loan, and that the donor has no expectations for you to pay the money back. A gift can be broadly defined to include a sale, exchange, or other transfer of property from one person (the donor) to another (the recipient).