Gift Tax Explained: How Much Can You Give Without Paying Tax?

Planning to help a child with a down payment, pay a grandchild's tuition, or give holiday cash? The good news: very few Americans ever pay gift tax. Thanks to two exclusions, most gifts are tax-free. You may just need to file a form.

The annual gift tax exclusion

You can give up to this amount to as many people as you want each year with no tax and no paperwork. A married couple can each give the full amount, so together they can give $38,000 per recipient in 2026 ($40,000 in 2027).

Example: parents with three children and three grandchildren could give each of them $38,000 in 2026, a total of $228,000, without filing a gift tax return.

What happens if you give more?

Giving more than the annual exclusion to one person doesn't mean you owe tax. You file Form 709, and the excess is subtracted from your lifetime gift and estate tax exemption:

• 2026: $15 million per person
• 2027: $15.48 million per person

You only pay gift tax after using up the entire lifetime exemption, which few people will ever do. The 2025 tax law made the higher exemption permanent and indexed it to inflation.

Gifts that are always tax-free

• Tuition paid directly to a school (not to the student). Room, board and books don't count for this exception.
• Medical expenses paid directly to the provider.
• Gifts to your U.S. citizen spouse, in any amount. Gifts to a non-citizen spouse have a separate annual limit ($201,000 in 2027).
• Gifts to qualified charities and political organizations.

Who pays the gift tax?

The giver, not the recipient. A gift isn't taxable income for the person receiving it, regardless of the amount.

Gifting strategies

Superfunding a 529 plan

You can contribute up to five years of annual exclusions at once to a 529 college savings plan and spread it over five years on Form 709: up to $95,000 per beneficiary in 2026 ($190,000 for a couple).

Giving appreciated stock

The recipient takes over your cost basis. If they're in a lower capital gains bracket, potentially 0%, they could sell with little tax. Watch the "kiddie tax" for children. See capital gains tax explained.

Helping with a first home

Mortgage lenders usually require a gift letter stating the money doesn't need to be repaid. Plan the timing with the buyer. See saving for a down payment.

Funding a child's accounts

Contributions to a child's Trump Account or custodial account are gifts that count toward the annual exclusion.

Common mistakes

• Forgetting Form 709 when you exceed the annual exclusion for any one person, or when you elect gift splitting with your spouse.
• Paying tuition to the student instead of directly to the school.
• "Loans" with no paperwork. Large family loans should have a written note and charge at least the IRS minimum interest rate (the applicable federal rate), or they may be treated as gifts.

Sources: IRS; IRS tax year 2027 inflation adjustments; One Big Beautiful Bill Act (2025).