Gift Tax
A federal tax on the transfer of money or property from one person to another without receiving fair value in return.
What is Gift Tax?
The federal gift tax applies to transfers of money or property from one person to another when the donor receives nothing (or less than full value) in return. It is designed to prevent wealthy individuals from avoiding estate tax by giving away assets before death. Key provisions: the annual gift tax exclusion ($19,000 per recipient in 2025) allows gifts up to this amount per person per year without gift tax consequences. Gifts above the annual exclusion count against the donor's lifetime gift and estate tax exemption ($13.99 million in 2025). Unlimited exclusions apply to gifts for a spouse, tuition paid directly to an educational institution, and medical expenses paid directly to a provider.
Example
A parent gives each of their three children $19,000 in 2025 — a total of $57,000. No gift tax is owed and no filing is required because each gift stays within the annual exclusion. If the parent gives one child $30,000, the $11,000 above the exclusion is reported on Form 709 and reduces the parent's lifetime exemption — but no gift tax is actually owed until the lifetime exemption is exhausted.