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Like most people I talk to, when you ask yourself, “What’s the maximum I can give to my kids this year?” you’re probably thinking of a number like $10,000, $15,000 or $19,000.
But when it comes to the gift tax limit, the number you’re probably thinking isn’t actually the limit at all.
Today, we’ll go through the rules, along with common questions and misconceptions, of the IRS gift tax system in 2025 so that you can give the amount you want to your kids without the fear of extra taxes or lengthy paperwork.
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Before we learn how to optimize the gifts you give, you need to understand there’s not just one limit, but two different levels to plan for:
- The lifetime exemption
- The annual gift tax exclusion (the number you’re probably looking for when you think limit)
These numbers change each year, and for this article, we’re talking about the 2025 numbers. You can read about the 2026 numbers in the article What Is the Gift Tax Exclusion for 2025 and 2026?
To start, just know that there is no limit to how much you can give to anyone at all. The IRS doesn’t prevent you from giving your money away. It’s your money — you can do what you want with it.
It’s just that once you reach a certain dollar amount, you’ll need to start paying taxes on what you give away. That level is called the lifetime exemption.
The lifetime exemption for 2025 is $13.99 million per person. You would have to give away more than $13.99 million over your entire lifetime before you pay any gift tax. If you’re married, your total lifetime exemption is $27.98 million.
In 2026, the lifetime exemption is increasing to $15 million per person (so $30 million for a married couple).
Then there’s the annual exclusion. It’s often thought of as the limit, but in reality, it’s just the amount of money you can give to each person without having to report the gift to the IRS.
It is important to know and plan for since it’s nice to avoid having to do the paperwork to report it. We’ll learn how to structure your gifts based on the annual exclusion shortly.
For 2025, the annual exclusion (meaning you don’t have to report it to the IRS) is $19,000 per recipient.
In 2026, the annual exclusion stays the same, at $19,000 per recipient.
You can give $19,000 to any person you want, and as many people as you want, in 2025 without having to report it to the IRS. Then, next year, you can gift the annual exclusion amount again to as many people as you want.
Your spouse can do the same thing, which effectively doubles the amount you can give without having to report it to the IRS.
Now, there are some specific rules that apply to very few people, like gifting to a non-citizen spouse, generation-skipping transfers and gifts of “future interest.” You can read about those rules and instructions at the IRS website.
Most people are giving less than the $13.99 million lifetime exemption, but if you want to give away more than $19,000 in one year, it’s helpful to structure your gifts to avoid IRS reporting requirements.
I have a client who told me in November that they want to give a significant amount to each of their two children this year. Here’s what I told them:
The husband could give $19,000 to their oldest and $19,000 to the youngest in 2025, and then repeat the giving in just a few short weeks in 2026. The wife could do the same.
Between the two of them, that’s eight total gifts of the annual exclusion amount ($19,000). Eight times $19,000 is $152,000 in gifting — without triggering the reporting requirements.
Both of their kids are married, so if they wanted to give even more, they could write checks to the spouses, which doubles the gifting to 16 times the annual exclusion. That’s $304,000 in gifting without being required to tell the IRS or paying any gift tax at all.
Common questions and their answers
Q: Do my spouse and I need to write separate checks when gifting?
While it’s not required, most tax preparers do suggest each spouse write a separate check. You would especially want to write separate checks for each tax year and give them to your kids in the corresponding tax year.
Also, write the word “gift” on the memo line and make a copy of each check for your own records.
Q: How much tax does my kid pay on the gift?
The person who receives the gift doesn’t pay taxes on that money at all. The gift tax is assessed to the donor, not the one receiving money. Your kid will not need to pay tax and doesn’t even need to report the gift.
Q: How do gifts of stock work?
When you give stock, you are also giving the cost basis (the price you paid for the stock). So if you bought a stock for $5,000, and it’s now worth $10,000, when you give the stock directly to your kid, you won’t owe taxes on the capital gains. Your child will owe taxes on the capital gains when they sell it, though.
Q: Can I give money from my IRA tax-free?
No. If you take money from your traditional IRA to give to your kids, the withdrawal from the IRA is still considered a taxable event.
The IRS doesn’t care what you do with your IRA money — they care that you took it out of the IRA, and you’re required to report that on your tax return.
Q: What happens if I give more than the annual exclusion?
You would have to file the IRS Form 709 Gift Tax Return. The point of the form is to track how much you give each year above the annual exclusion amount so that once you reach the lifetime exemption amount, you start paying the gift taxes you owe.
Remember that while you likely won’t owe any taxes, it is still a separate tax return, and your tax preparer is likely to charge you for filing an additional tax return.
Q: Can I pay my kid’s college tuition or medical bills without paying gift tax?
Paying for education or medical expenses are the two exceptions to the gift tax. You can pay any amount for anyone (they don’t even have to be family), and it doesn’t count toward the annual exclusion or the lifetime exemption.
You would have to pay the educational institution or medical provider directly, though. The amount could cover only tuition, not books or room and board, and a gift into a 529 plan still counts as a gift.
The medical care you pay for must also meet the IRS rules for deductible medical expenses.
The gift tax system is a lot less painful than most people realize. The majority of Americans can give what they want to whomever they want without ever paying taxes or even telling the IRS.
That doesn’t mean you can write big checks without thinking about the rules. Before you write that check, first think about who you want to give money to, how much and whether splitting gifts between spouses, or tax years, would reduce your taxes or paperwork.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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