One of the questions I tend to get every year is, 'How much tax will I have to pay if someone gives me a lot of money as a gift'. The answer is nothing. The facts are that the person giving you the money is the one that may be subject to something called the gift tax. And while there are a lot of exclusions to the tax, filing the paperwork to exclude yourself is really a pain in the....
That said, there is some good news: most people will never come close to exceeding the lifetime estate and gift tax exemption, which, due to the new 2025 Trump/GOP tax law, will remain extraordinarily high for the average household.
In addition to that, the IRS has several categories of financial gifts that don’t count toward annual gift tax limits, as long as they meet specific requirements — no matter how much you give. So, if you have been fortunate enough in your life to make enough money to give away, there are some ways you can do it without having to worry about paying gift taxes.
How much you can give tax-free in 2025
Gifts at or below the annual gift tax exclusion (often called the gift tax limit) to each recipient, per year, do not require a gift tax return and don't use any of your lifetime exemption. For instance:
- The annual gift tax exclusion for 2025 is $19,000 per recipient, up $1,000 from last year's limit.
- Individuals can give up to $19,000 to any number of people in 2025 without triggering gift tax reporting requirements.
- Married couples can effectively double this amount to $38,000 per recipient.
Note: The gift tax exclusion for 2026 (returns you typically file in early 2027) will remain unchanged from the $19,000/$38,000 amounts from this year.
There are also some special categories that allow you to give unlimited amounts without touching your annual exclusion or lifetime exemption. Some people use these rules for estate planning, while others use them to help loved ones more efficiently. Either way, knowing the exceptions can make a difference. Let's look at them.
1. Tuition gift tax exclusion
The IRS allows you to pay an unlimited amount of someone’s tuition as long as you pay it directly to a qualified educational organization. This only applies to tuition at a qualified educational organization.
You can combine this with the standard annual gift tax exclusion.
- For example, you could pay a grandchild’s $30,000 tuition bill directly to their college and still give them an additional $19,000 (or whatever the annual exclusion is for that year) for books or living expenses.
- You can also combine unlimited tuition payments and gift-splitting if you are married.
- So a married couple could each pay unlimited tuition for someone and also each gift the annual exclusion amount without worrying about tax reporting.
Make sure you make the gift the proper way. Reimbursing tuition or giving the student money to pay the bill doesn't meet the exception requirement. To keep it non-taxable, the tuition payment must go directly to the qualified educational institution. Also, this exclusion applies only to tuition, not to other college expenses like room, board, books, fees, or supplies.
2. Medical expenses gift tax
If you pay someone’s medical bills directly to the provider or insurer, those payments are considered nontaxable gifts, no matter the amount.
However, make sure that the expenses qualify as deductible medical expenses under IRS rules. This may include hospital bills, surgeries, dental procedures, long-term care, insurance premiums (including health, long-term care, and specific Medicare plans), and more.
Therefore, it can exclude costs that are not typically considered qualified medical expenses, like those for:
- some purely cosmetic procedures
- general health or wellness programs
- non-prescription drugs (with limited exceptions) and
- elective procedures not tied to a medical condition.
Who you pay makes a difference here also. Paying the bill directly to the hospital, doctor, or insurer doesn't trigger a tax concern. But handing someone money and asking them to pay the bill, or reimbursing them after they pay, is treated as a regular gift and counts toward your annual exclusion.
3. Are gifts to a spouse taxable?
When your spouse is a U.S. citizen, gifts between spouses are considered unlimited and tax-free due to what is known as the "unlimited marital deduction." That provision treats a married couple as a single economic unit for federal estate and gift tax purposes
Larger transfers, like adding a spouse to a home deed or gifting investments, are generally still considered nontaxable gifts. However, you should keep documentation in case you need it later, since in some cases involving a non-citizen spouse, the transfer might be reportable on your tax return.
That is because if your spouse is not a U.S. citizen, the IRS sets a separate, larger annual noncitizen spouse exclusion limit for them ($190,000 for 2025), which is indexed for inflation. (If you exceed that limit, filing Form 709 is required.)
4. Donations to qualified charities
Gifts to IRS-recognized charities (qualified 501(c)(3) organizations) are not subject to gift tax, and they normally don’t require filing Form 709. They may also be deductible on your income tax return if you are one of those rare people who can itemize and stay within the IRS percentage-of-adjusted gross income (AGI) limits for your type of donation.
This rule applies only to legitimate charitable organizations, not to individuals or non-charitable nonprofits.
For example, donating to an IRS-recognized medical charity would be tax-free for gift-tax purposes. But sending money to a friend’s personal fundraiser or GoFundMe is a regular gift and counts toward the annual exclusion.
Gifts to other types of nonprofits, like 501(c)(4) or 501(c)(6) groups, generally don't qualify as charitable gifts for income-tax purposes and may be treated as taxable gifts.
5. Political contributions
Believe it or not, political contributions are exempt from gift tax.
Donations to qualified political organizations, like registered campaign committees, political parties, and PACs that meet IRS requirements, are not treated as gifts and do not require filing Form 709.
However, political contributions are not tax-deductible for income tax purposes, and donations made directly to individuals rather than to a qualified organization do not qualify for this exemption.
So, what about gifts not included in these 5 categories?
The annual gift tax exclusion and lifetime exemption protects most everyday gifts from tax.
Even if you exceed your annual exclusion with a taxable gift, paying the actual gift tax is rare because you can apply part of your lifetime unified gift and estate tax exemption before any tax is due.
This simply means non-excluded gifts that exceed the threshold will require filing a gift tax return, which is why moving big checks into one of the five nontaxable categories can be valuable for some big givers.
Filing Form 709
If you do give more than the annual exclusion amount to any one person in a single year and it doesn’t fall under one of the exceptions, you will probably need to file Form 709. Filing doesn’t mean you'll owe tax on the gift. It just keeps track of how much of your lifetime exemption that you’ve used so far.
So, if you're paying for someone’s groceries, contributing to rent, helping with a car repair, or giving holiday or birthday gifts, those expenses rarely come close to the IRS threshold.
Also, sending money via payment apps like Zelle, Venmo, or Cash App doesn’t automatically make a transaction taxable. If the money involved is taxable in the eyes of the IRS depends on the nature of the underlying transaction.