What You Need to Know Before Making Financial Gifts

Before you give money or assets to family or others, it’s important to understand tax rules, reporting requirements, exemptions, and planning strategies — including annual gift limits, lifetime exclusions and how different types of gifts are treated under U.S. tax law.

By Associated Press – Financial Correspondent

Last Updated: Feb. 5, 2026

Annual Gift Tax Exclusion and Reporting

For tax years 2025 and 2026, the Internal Revenue Service allows individuals to gift up to **$19,000 per recipient per year** without triggering gift tax reporting requirements — and married couples can each give that amount, effectively doubling the tax‑free gift to $38,000 per person. Gifts at or below these limits generally do not need to be reported to the IRS. If you give more than $19,000 to a single individual in a year, you must file IRS Form 709 to report the gift, but that doesn’t necessarily mean you’ll owe tax. :contentReference[oaicite:0]{index=0}

Lifetime Exclusion Means Tax Owed Is Rare

Even gifts above the annual exclusion often won’t result in tax because of a generous **lifetime gift tax exemption**. Under current law, individuals can give away up to approximately **$15 million over their lifetime** without owing federal gift tax; amounts above the annual exclusion simply reduce this lifetime exemption. Only after total gifts (beyond annual allowances) exceed the lifetime exemption would tax potentially be owed. Because most people fall well below this high threshold, owing gift tax is uncommon. :contentReference[oaicite:1]{index=1}

Gift Taxes vs. Income Taxes

It’s important to know that **gifts are not taxable income to the recipient** — people who receive cash, property or other assets as gifts generally do not include the amount on their income tax return. The obligation for reporting or paying gift tax lies with the giver, not the person receiving it. However, gifts to individuals typically do not provide a tax deduction for the giver either, unlike donations to qualifying charities which may be deductible. :contentReference[oaicite:2]{index=2}

Exceptions and Special Rules

Certain types of transfers are treated differently under tax rules. For example, direct payment of someone’s **tuition or medical expenses** does not count toward the annual gift exclusion and is not taxable. Additionally, gifts to a spouse who is a U.S. citizen are generally exempt from gift tax, and there are separate rules for spouses who are not citizens. Paying attention to these exceptions can help you give more efficiently. :contentReference[oaicite:3]{index=3}

Strategic Planning and Documentation

Before making large financial gifts, it’s wise to document transactions and track cumulative gifts to each recipient over time, especially if you exceed annual exclusion amounts — keeping proper records helps ensure accurate tax reporting. Consulting with a tax or financial advisor can help you align gifting decisions with broader goals, including estate planning or passing on wealth efficiently without unexpected tax consequences. :contentReference[oaicite:4]{index=4}