Gift Taxes

The taxation of gifts is complex, but the vast majority of us will never actually pay gift taxes, at least under current tax code. Gifts are generally not taxable to the recipient, however, if a gift of an asset such as a rental property is made, and then that property begins generating income, that income will be taxable to the new owner of the property (the recipient). Any potential gift taxation is the responsibility of the giver, not the recipient. There is currently a gift tax exclusion of $17,000 per year per recipient, meaning that you can gift that amount to an unlimited number of people with no tax or reporting consequences. You can also split gifts with your spouse, meaning a married couple can gift up to $34,000 per year per recipient with no reporting requirement. This is known as the annual exemption. Gifts for medical or education expenses paid directly to an institution are not counted against the annual gift exclusion. Once you get above those limits, you must report those gifts on a Form 709 Gift Tax Return, which is due on April 15 of the year following the year of the gift. Generally any gifts you give above the limit use up what is known as the Uniform Lifetime Credit. This credit essentially allows each individual to transfer, either by gift while living or by bequeathment after death, up to $12.92 million over their lifetime. Gifts above the annual exclusion amount eat into this limit, which is adjusted for inflation every year. Unless Congress acts, this exclusion drops to $7 million in 2026.