A gift is a transfer of money or property made by a donor to another person without receiving full consideration in return. This article focuses on gifts made by a donor during their lifetime.

The recipient of the gift does not pay federal taxes on the gift. However, income generated from a gift — such as interest, dividends, or capital gains—is taxable to the recipient.

During their lifetime, an individual may gift up to a lifetime exclusion amount plus an annual exclusion amount without owing federal gift taxes. The current lifetime exclusion limit is $15,000,000 and the annual exclusion amount is $19,000. These amounts are indexed for inflation. Couples can use gift splitting to increase their individual tax-exempt amounts.

The annual exclusion applies per recipient. For example, in 2026 an individual could give $19,000 to each of 100 different people without exceeding the annual exclusion.

When is Gift Reporting Required?

Donors who give more than the annual exclusion amount to any one individual must file  IRS Form 709 United States Gift (and Generation-Skipping Transfer) Tax Return.

Filing the form does not necessarily mean tax is owed. It allows the IRS to track taxable gifts against the donor’s lifetime exemption and apply gift taxes if that exemption is exceeded.

Item That Can Be Excluded from Gift Tax Reporting

• Tuition or medical expenses paid for someone when payments are made directly to the educational or medical institution.
• Gifts made directly to a spouse who is a U.S citizen.
• Gifts made to qualified charities
• Gifts made to political organizations.

Inheritances Are Different Than Gifts

Inheritances are subject to different federal tax rules than gifts received during the donor’s lifetime. Estates with a total value below the $15,000,000 federal estate tax exemption in 2026 are generally not subject to federal estate tax.  However, beneficiaries who inherit property or retirement plans may face complex situations and federal taxes. These beneficiaries may want to consult with a tax advisor.

Sources:

IRS, “Frequently asked questions on gift taxes” retrieved 3/30/2026

Tennon Financial, Gifting, annual gift exclusions, gift taxes and gift tax returns (IRS Form 709), 3/1/2026.

Fidelity Investments, “Planning strategies for gift splitting,” 8/29/2024.

IRS, “Estate tax ,” retrieved 4/3/2026.

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