People can save their time and money by complying with the annual tax limit when gifting to friends, families and others.
IRS Gift Limit 2024 and 2025
Are you thinking about gifting cash or property to your loved ones or others in 2024 and 2025? If yes, then you must know the gift tax exclusions to prevent yourself from filing tax returns.
You can learn about federal gift taxes here and how much you may give a one-time gift without worrying about filing taxes.
What is the Gift Tax Limit and does it only apply on cash?
The gift tax is a federal tax limit in which individuals can give gifts throughout the year and it’s between 18% to 40%.
Although the payer usually pays the tax, in some specific situations the recipients can be accountable. If the giver dies before paying gift tax, then the estate will be responsible for federal gift tax.
- The gift tax doesn’t apply on cash, it also applies on stock transfers, real estate, cars, forgiven debts, insurance policy benefits, and more.
- For tax purposes, the item’s “fair market value” at the time of the gift is the present amount.
Tax-Free Gifting: What are the Limits?
Majority uses exemptions to get around the federal gift tax. A fixed amount of dollars which is adjusted as per inflation rate is known as the gift tax exclusion or limit. People can share gifts with their number of loved ones under this limit and if they are married, their partner can also do this.
Note: Certain gifts are not included in gift taxes such as those gifts which are provided to spouses, political groups, charity organisations, educational institutions (for tuition), and healthcare providers (for medical care).
When you want to give large gifts, it’s a good idea to consult with tax professionals because they will guide you about every tax rule and regulation.
Gift Tax-Free Limits 2024
- The gift tax cap for 2024 is $18,000 annually and it’s $1000 up from last year since it was considered to increase yearly for inflation.
- This limit for combined married couples is $36,000 in 2024.
For instance, you and your spouse can give tax-free gifts of up to $36,000 to each child, their spouses, and grandchildren, totalling $216,000 in 2024 if you are married and you have two married children with two grandchildren.
Keep in Mind: You can stay away from filing gift tax returns of the year if you keep under these limitations. You also need to give gifts 2024 before 31 December 2024 because the annual gift tax limit is time sensitive.
Gift Tax-Free Limits 2023
The tax free gift limit in the previous year 2023 was $17,000 for individuals and the combined limit for married couples was $34,000 in 2023.
Gift Tax-Free Limits 2025
The new gift and estate tax free limits have been released by the International Revenue Service(IRS) recently. The annual gift tax limit in 2025 will be $19,000 per person, which is up $1,000 from 2024. You can use these figures to estimate your 2025 due tax returns which will be filed in 2026.
- Individuals will not be responsible for tax return obligations in 2025 if they give up to $19,000 to any number of people.
- This limit will be doubled for combined married couples which will be up to $38,000 in 2025.
Each person’s lifetime estate and gift tax exemption will rise from $13.61 million in 2024 to $13.99 million in 2025.
Married couples are exempted to avoid paying federal estate and gift taxes on up to $27.98 million. It’s crucial to note that these exemptions will expire at the end of 2025, if Congress does nothing, may return to around half of this amount in 2026.
Because of this looming change, smart gift planning is crucial for high earners and families in upcoming years.
Exceeding the Gift Tax Limit: What You Need to Know
Individuals have to file annual gift tax returns on IRS Form 709 if they exceed the annual gift tax limit. Because of high lifetime estate and gift tax exemption, it doesn’t mean that you owe money if you exceed these limits.
The lifetime estate tax exemption in 2024 which is double for married couples is $13.61 million and it was $12.92 million in the previous year 2023. As we have mentioned earlier, this will see a rise of $13.99 million in the upcoming year 2025.
Therefore, most people are not required to pay federal gift tax. If this sum exceeds the lifetime limit then individuals have to pay gift tax actually. IRS form 708 is used to report the exceeding limits of gift tax return beyond exclusions.
Key Changes to the Lifetime Gift Tax Exemption in 2026
Due to the expiration of the looming Tax Cuts and Jobs Act (TCJA), the lifetime estate and gift tax exemption is anticipated to be cut in half in 2026. These exemptions will be made for inflation adjustments and it is estimated to be lower than 7 million or less.
- The gifts which will be made in 2026(if the limit expires as planned) or later may be liable to up to 40% gift tax if you have a large estate and you are wealthy.
- However, those gifts which will be made before 2026 are free from the high lifetime tax limits.
Gift Tax-Free Limit 2024: Final Thoughts
You can save your time when navigating the gift-giving process by being aware about the gift tax exclusion.
A professional tax expert can guide you better according to your unique circumstances because estate planning and giving gifts can be a complex process.
