Gift Tax Limits: How Much Can You Gift?

The IRS has updated the annual gift tax exclusion for 2024, increasing it to $18,000 from $17,000 in 2023. This exclusion applies per person and gift recipient, so you’re free to spread your gifts across multiple friends and family members without triggering a gift tax, as long as you don’t exceed the $18,000 limit for any single person.

Lifetime Gift Tax Exemption

In addition to the annual exclusion, there’s a substantial lifetime gift tax exemption set at $13.61 million for 2024. So, if you were to pass away in 2024, you could have given away up to this amount over your lifetime without owing gift taxes.

On a smaller scale, let’s say you exceed 2024’s $18,000 annual exclusion with a particular gift to a single person. In this case, you’ll need to report it, but you won’t face taxes. Instead, the excess amount will simply reduce your lifetime exemption.

Certain gifts are always tax-exempt, regardless of the amount. These include gifts to U.S. citizen spouses, dependents, charitable donations, political donations and payments made directly to educational or medical institutions on behalf of someone else. For non-citizen spouses, the annual exclusion is $185,000 in 2024.

Gift Tax Rates and Filing

Gift taxes, which range from 18% to 40%, are only due if you’ve surpassed the lifetime exemption. Remember, the gift tax typically falls on the giver, not the recipient. However, recipients may face capital gains taxes if they sell gifted property later on.

If you give more than $18,000 to any one person in 2024, you’ll need to file IRS Form 709. This form should be completed and submitted with your federal tax return.

Managing Your Gift-Giving

Review and understand the updated gift tax exemptions for 2024 and beyond to plan your gifting strategy effectively.

Keep track of gifts that exceed the annual limit to ensure proper reporting and to manage your lifetime exemption.

Consider consulting with a financial advisor if you’re considering large or complex gifts to navigate potential tax implications.

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