The gift tax exemption is the key financial tool that can help you preserve your estate for generations to come. If you’re at risk of exceeding your state’s estate tax exemption limit, by gifting your estate—or portions of it—while you’re alive, you can avoid the hefty estate tax on whatever you decide to give to your heirs. This article delves into key questions about how this tax and exemption work.

How Much Can I Give My Loved Ones Without Being Taxed

Many people dream of giving to their loved ones to help them, and if you find yourself in a position to help your loved ones financially, there are strategic ways you can do that. You are allowed to give any individual a gift of up to $18,000 in a year without a tax penalty. You can do this as many times as you want in a year with no penalty so long as the recipients of your gifts are different people and the gift for each individual does not exceed the value of $18,000 as of 2024.^[1]

When Will I Have to Pay the Gift Tax?

The answer is: maybe never. As we said before, gifts of $18,000 or less are not subject to taxes. When you give a gift that is worth over $18,000 to someone, the value of that gift is tracked. In a given year, if you exceed this amount, you’ll dip into your lifetime gift tax exemption amount, which, federally, as of 2024, is $13.61 million, but the gift will still be tax-free. Keep in mind that states often have stricter estate tax laws than the federal law. Check your state’s gift tax exemption and estate tax laws before strategizing.^[1]

Who Actually Pays the Gift Tax?

The person giving the gift pays the tax. The only time the person getting the gift will have to pay is if the person giving the gift doesn’t report the gift or doesn’t pay their appropriate taxes on the gift.^[1]

Do I Have to Report Gifts to My Spouse?

No. Gifts of any value can be exchanged between spouses without any tax consequences.^[1]

Are There Other Tax-Free Gifts?

There are many ways to make donations, gifts, or contributions in tax-advantaged ways. A tax professional may be a great resource for you to provide options for how to make tax-advantaged gifts that fit within your financial strategy.

Giving back may be a big part of your retirement plan. If you want to help your family members with financial gifts and you are looking for guidance on how to do that, consider reaching out to one of our financial professionals for a complimentary review of your finances.