For retirees, understanding the federal gift tax is an important part of sharing wealth with family and friends. Knowing how the rules work can help you give generously while also protecting your long-term financial and estate planning goals. With the right approach, you can preserve your legacy and reduce the chance of paying unnecessary taxes.

What Is The Gift Tax Limit For 2025?

In 2025, the annual gift tax exclusion is $19,000 per recipient. This means you can give up to $19,000 to any one person in a calendar year without needing to file a gift tax return or reduce your lifetime gift tax exemption.

If you’re married, you and your spouse can combine your limits—a process called gift splitting—to give up to $38,000 to one person in a single year.

The lifetime gift and estate tax exemption for 2025 is $13.99 million per individual. If you give more than the annual limit, the extra amount gets counted against this lifetime total before any taxes are due.

How Does The Federal Gift Tax Work?

What Counts as a Gift?

A gift in this context is anything you give to someone without receiving something of equal value in return.

Examples include:

• Giving someone money.
• Transferring ownership of property.
• Forgiving a debt.
• Letting someone use your property without charging rent.

Annual Gift Tax Exclusion

• In 2025, you can give up to $19,000 per person per year without it being taxed.
• This means you can give $19,000 to one person, and another $19,000 to someone else, and stay within the rules.
• Married couples can give $38,000 total per person per year by combining their exclusions.

Lifetime Gift Tax Exemption

• The lifetime exemption is tied to the estate tax exemption, which is $13.99 million per person in 2025.
• If your total gifts over the years exceed the annual limits, the extra amounts count against this lifetime exemption.
• You only owe gift tax if your total lifetime gifts go over this limit.

Reporting Gifts On Your Taxes

• If you give more than the annual limit to someone, you must file IRS Form 709 with your federal income tax return.
• Filing the form does not automatically mean you owe taxes. You only pay gift tax if your total lifetime gifts go beyond the $13.99 million exemption.

Gift Tax Rates

• If your gifts go over both the annual and lifetime exemptions, tax rates apply on the excess.
• These rates range from 18% to 40%, depending on how much you’ve gone over.

Who Pays the Gift Tax?

• The person giving the gift (the donor) is usually responsible for paying the gift tax—not the person receiving the gift.

Gifts That Are Not Taxable

Some gifts are never taxed, including:

• Gifts to a U.S. citizen spouse.
• Tuition payments made directly to a school.
• Medical payments made directly to a healthcare provider.
• Charitable donations to qualified organizations.

Why Does the Gift Tax Exist?

• The gift tax helps prevent people from avoiding estate taxes by giving away assets during their lifetime.

Planning Tips

• Use your annual exclusion every year to give tax-free gifts.
• Pay tuition or medical bills directly for loved ones instead of giving them cash.
• Work with a tax advisor to create a gifting strategy that fits into your overall estate plan.

By understanding the gift tax rules, you can make informed choices and share your wealth wisely. Have questions about the federal gift tax? Contact Zynergy Retirement Planning today.