A cash gift can brighten someone’s day. Whether it’s a special occasion or a tough time, gifting money is often the simplest, most meaningful way to help out family and friends.
But here’s the thing: If your gift goes over the limits set by the IRS, you may need to file a gift tax return. In 2025, that limit is $19,000 per person.
You can still give generously without getting a surprise tax bill by understanding the rules on gifting money to family. This quick guide will get you up to speed on how the gift tax works, how much money you can gift tax-free, and when you may be responsible for taxes.
Key takeaways
- In 2025, you can give up to $19,000 per person tax-free without telling the IRS. For married couples filing jointly, you can give up to $38,000.
- Anything above this annual limit must be reported via IRS Form 709. It’s also subtracted from your $13.99 million lifetime exemption.
- The person giving the gift is usually responsible for paying any tax that’s owed, not the recipient. Most taxpayers don’t pay gift tax unless they’ve given away more than their lifetime exemption.
- Money gifted between spouses (both US citizens), tuition or medical bills paid directly to the organization, as well as charitable and political donations aren’t subject to gift tax.
- Knowing the rules upfront makes gifting money to family easy and worry-free. If you have questions, it’s a good idea to consult a tax professional before gifting large amounts.
What is the gift tax?
The gift tax is a federal tax on giving money or property to someone without getting something of equal value in return. This includes helping your kids with a down payment on a home, gifting a car, or sending money to help a friend.
Not every gift gets taxed, though. Thanks to annual and lifetime limits set by the IRS, you can usually still give big without owing a dime. Let’s look at how it works.
How does the gift tax work?
The gift tax kicks in if you give more than the annual limit, without getting fair value back. Even if you exceed the annual limit, you still might not have to pay any taxes if you haven’t surpassed the lifetime gift tax exclusion. But you will have to report excess annual contributions to the IRS by filing an additional tax form (Form 709).
Say, for example, you give your daughter $60,000 to help her buy her first house. Thanks to the annual limit, the first $19,000 can be given free and clear. The extra $41,000 counts against your lifetime exemption, and you’ll need to report it. Since most people don’t come close to meeting their lifetime gift limit, you probably won’t pay any tax.
What is the gift tax limit for 2025?
So, how much money can you gift tax-free each year? The IRS updates these limits annually.
For 2025, you can give up to $19,000 per person, an increase of $1,000 from last year.
The lifetime gift tax exemption was also raised to $13.99 million in 2025. Only gifts that go above your annual limit count toward this exemption.
How does the annual gift tax exclusion work?
Staying under the annual gift tax exclusion means you don’t have to worry about paying tax when gifting money for birthdays, holidays, and special occasions.
This is a per-person limit, so you can give $19,000 to your child, another $19,000 to a niece, and another $19,000 to a neighbor, all tax-free. If you’re married, you and your spouse can each give $19,000, adding up to $38,000 per person.
What if you give more? When you do your taxes, you’ll file Form 709 to let the IRS know. But unless you’ve used up your lifetime limit, you still won’t owe anything.
If you’re thinking about giving a large amount of money this year, it’s a good idea to read the IRS Gift Tax FAQs or talk with a tax professional so you don’t run into an unexpected bill.
What are the lifetime gift tax limits?
Your lifetime gift tax exemption is the total amount of money you can gift to family members tax-free during your lifetime, above the annual limits.
In 2025, this limit is set at $13.99 million per person. And because it’s per person, married couples can double that amount in lifetime gifts. Any gifts above this limit are then subject to taxes.
This limit was set to drop significantly in 2026, but recent legislation will increase it to $15 million per person next year.
Because it’s so high, most people never come close to hitting their lifetime exemptions. If you’re planning to pass along a large amount of wealth, you should keep tabs on how your annual gifts chip away at this total.
What is the gift tax rate?
The gift tax rate in the US ranges from 18% to 40%, but here’s the good news: You’ll only see this bill if you give more than your lifetime exemption.
If you go over the $19,000 annual limit for one person, the extra chips away at your lifetime exemption of $13.99 million. For example, the first $19,000 of a $20,000 gift is tax-free, but the next $1,000 would be subtracted from your lifetime exemption.
Once you max out the lifetime exemption, the following gift tax rates kick in:
| Gift Value | Tax Rate |
| Up to $10,000 | 18% |
| $10,001 to $20,000 | 20% |
| $20,001 to $40,000 | 22% |
| $40,001 to $60,000 | 24% |
| $60,001 to $80,000 | 26% |
| $80,001 to $100,000 | 28% |
| $100,001 to $150,000 | 30% |
| $150,001 to $250,000 | 32% |
| $250,001 to $500,000 | 34% |
| $500,001 to $750,000 | 37% |
| $750,001 to $1,000,000 | 39% |
| More than $1,000,000 | 40% |
Source: Internal Revenue Service
A number of exceptions and rules are on the books for calculating gift taxes. Check the instructions for the IRS Form 709 to learn exactly how much you can gift tax-free, or chat with a tax professional for peace of mind.
Who pays the gift tax?
In the US, the person giving a gift is responsible for any tax due, not the person receiving it.
It’s worth noting that most gifts won’t be taxed thanks to the annual exclusion limit and lifetime exemption. Remember, in 2025, only gifts that reach the following limits are potentially subject to gift taxes:
- $19,000 per individual recipient, as per the annual gift tax exclusion
- $13.99 million, as per the lifetime gift tax exemption
In rare cases, the person getting the gift can agree to pay the taxes owed, but the IRS often still looks to the giver if the taxes go unpaid.
What is considered a gift?
Gifting can be a lot of things. It might be helping a friend with rent, funding the down payment on a parent’s home, giving money as a wedding present, or gifting money for graduation.
So, which gifts should you be concerned about when it comes to taxes? The IRS definition is all that matters here. It defines a gift as any transfer of money, property, or assets where the giver does not receive something of equal value in return.
Here are some specific examples of what the IRS considers a gift:
- Cash, except to your spouse
- Real estate, like a house or land, without full payment in return
- Valuable items like cars, jewelry, arts, or stocks
- Forgiving a debt
- Letting a friend stay in your house rent-free
- Selling something valuable for less than it’s worth (the discount is a gift)
- Helping someone with their bills without expecting repayment
Everyday presents and birthday checks? Usually no big deal. But large money transfers often need more paperwork.
What gifts are safe from taxes?
Lots of gifts are generally “safe” from federal gift taxes. Here’s a quick rundown of examples:
- Gifts to your spouse if you’re both US citizens
- Donations to registered charities
- Money to political organizations or candidates
- Tuition and medical bills, as long as you pay the school or provider directly
Stick with these, and you won’t have to think twice about taxes. Remember that it’s always a good idea to check with a tax professional to make sure you’re not breaking any rules with your gifts and donations.
Gifting money is now simpler than ever
Now that you’re armed with the knowledge and tools to gift money tax-free, why wait? Make someone’s day and send them a gift they’ll never forget. With Western Union, you can gift money online to family and friends with just a few taps on your screen.
Whether you’re covering your niece’s dance lessons, helping a child with rent or tuition, or celebrating your dad’s retirement, the potential for gifting are endless.
You can send cash safely with the Western Union mobile app or from hundreds of thousands of agent locations worldwide.
With the right planning, you can give generously without any unexpected taxes.
FAQs
Recipients generally don’t pay taxes on gifts received, regardless of the amount. Unless other arrangements are made prior to the transfer of funds, the burden typically falls on the gift-giver.
The IRS counts on you to tell them. If you give more than the annual limit to one or more people, you’ll need to file Form 709 when you do your taxes. Banks, attorneys, or accountants may flag large transfers, alerting the IRS to bigger cash gifts. And with certain gifts, like real estate or large cash transfers, there’s usually a paper trail through deeds, bank records, or tax forms. While the IRS may not catch every gift right away, failing to report can lead to penalties and interest if you’re audited.
You need to file a gift tax return (IRS Form 709) any time you give more than the annual limit ($19,000 per recipient in 2025) or give a future interest gift (like putting money in certain trusts). Like most taxes, your return is generally due by April 15 of the year following the gift.
The giver pays gift tax, not the recipient. In special cases, the recipient can agree to pay gift taxes, but the IRS still looks to the giver first.
The annual gift tax exclusion for 2025 is $19,000 per person. Couples can give together, doubling this amount to $38,000 per person. You can give up to these amounts to any number of people without having to pay tax on the gifts. If you go over the annual limit, you report the excess when you file taxes, though you likely won’t owe anything unless you’ve used up your lifetime gift limit.
