Federal gift tax rates run from 18% to 40%, but the honest answer to how much gift tax you will owe is almost always zero. Two thresholds do the work: a $19,000 annual exclusion per recipient in 2026 and a $15 million lifetime exemption.1Internal Revenue Service. What’s New — Estate and Gift Tax Only gifts that clear both start generating an actual tax bill, and the rate table only matters once you get there.
The $19,000 Annual Exclusion
The first shield is the annual exclusion. In 2026, you can give any one person up to $19,000 in a calendar year without owing gift tax and without filing anything.1Internal Revenue Service. What’s New — Estate and Gift Tax The exclusion resets each year and applies per recipient, so ten $19,000 gifts to ten different people in the same year produce no tax and no return.
Married couples can double up. If both spouses agree to split gifts on Form 709, they can give up to $38,000 per recipient per year, even when only one spouse’s money moved.2Office of the Law Revision Counsel. 26 USC 2513 – Gift by Husband or Wife to Third Party Both spouses must consent, the consent covers every gift either spouse made that year, and they become jointly liable for any tax that results.
The $15 Million Lifetime Exemption
Give one person more than $19,000 in a year and the excess doesn’t automatically become taxable. It draws down your lifetime exemption instead. For 2026 that figure is $15 million, locked in by the One, Big, Beautiful Bill signed on July 4, 2025.1Internal Revenue Service. What’s New — Estate and Gift Tax The exemption is unified with the estate tax, so every dollar you use in life is a dollar less available to shelter your estate at death.
An example makes the mechanics clear. Give your daughter $50,000 in 2026. The first $19,000 is covered by the annual exclusion. The remaining $31,000 comes off your $15 million lifetime exemption, leaving $14,969,000. You report the gift on Form 709, but you write no check to the IRS. Actual gift tax only starts once the full $15 million has been consumed.
The $15 million figure could change again. Earlier law had it dropping to roughly half its current level when Tax Cuts and Jobs Act provisions were set to expire; the 2025 legislation reset the number, but future legislation can move it again.
What the Rates Look Like Once You Owe
The rate schedule for gift tax is the same one used for estate tax, set in Section 2001(c) of the Internal Revenue Code and applied to gifts through Section 2502.3Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax4Office of the Law Revision Counsel. 26 USC 2502 – Rate of Tax Rates start at 18% on the first $10,000 of taxable gifts and climb through the brackets to a top rate of 40% on amounts above $1 million.
- Up to $10,000: 18%
- $10,001 to $20,000: $1,800 plus 20% of the amount over $10,000
- $20,001 to $40,000: $3,800 plus 22% of the amount over $20,000
- $40,001 to $60,000: $8,200 plus 24% of the amount over $40,000
- $60,001 to $80,000: $13,000 plus 26% of the amount over $60,000
- $80,001 to $100,000: $18,200 plus 28% of the amount over $80,000
- $100,001 to $150,000: $23,800 plus 30% of the amount over $100,000
- $150,001 to $250,000: $38,800 plus 32% of the amount over $150,000
- $250,001 to $500,000: $70,800 plus 34% of the amount over $250,000
- $500,001 to $750,000: $155,800 plus 37% of the amount over $500,000
- $750,001 to $1,000,000: $248,300 plus 39% of the amount over $750,000
- Over $1,000,000: $345,800 plus 40% of the amount over $1,000,000
The brackets apply to the cumulative total of taxable gifts over your lifetime, not to each gift in isolation. The calculation figures a tentative tax on all taxable gifts to date, then subtracts the tentative tax on gifts from prior years. For anyone whose cumulative taxable gifts sit below the $15 million lifetime exemption, the unified credit erases whatever the table produces, and the tax owed is zero.
Transfers That Don’t Count at All
Some transfers are outside the gift tax entirely. They don’t use up your annual exclusion or your lifetime exemption, and they don’t need to be reported.
Gifts to a U.S. Citizen Spouse
The unlimited marital deduction lets you transfer any amount to a spouse who is a U.S. citizen with no gift tax and no filing.5Office of the Law Revision Counsel. 26 USC 2523 – Gift to Spouse Ten million dollars tomorrow, still nothing owed.
If your spouse is not a U.S. citizen, the unlimited deduction doesn’t apply. You get an enhanced annual exclusion of $194,000 for 2026 instead, and anything above that counts against your lifetime exemption.6Internal Revenue Service. Frequently Asked Questions on Gift Taxes for Nonresidents Not Citizens of the United States
Tuition and Medical Expenses Paid Directly
Pay someone’s tuition or medical bills and there’s no gift tax at all, with no dollar limit, as long as the payment goes directly to the school or the provider.7Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts The check has to be written to the university or the hospital, not to the student or patient.
This is where the money is often lost. Give your grandchild $80,000 to cover tuition and let them pay the school, and you’ve made an $80,000 gift: $19,000 sheltered by the annual exclusion, $61,000 chipped off your lifetime exemption. Pay the same $80,000 directly to the school and the entire amount is exempt.8eCFR. 26 CFR 25.2503-6 – Exclusion for Certain Qualified Transfer for Tuition or Medical Expenses Same for medical bills: reimburse and it’s a gift; pay the provider and it isn’t.
Charitable and Political Contributions
Gifts to qualified charities are deductible from your taxable gifts, which functionally exempts them.9Office of the Law Revision Counsel. 26 USC 2522 – Charitable and Similar Gifts Contributions to political organizations are outside the gift tax altogether, with no dollar cap.10Office of the Law Revision Counsel. 26 USC 2501 – Imposition of Tax
Who Pays
The donor pays the gift tax, not the recipient.11Internal Revenue Service. Frequently Asked Questions on Gift Taxes Someone who receives a gift owes no income tax on it; a gift is not taxable income to the person who gets it.
Donor and recipient can arrange a “net gift” in which the recipient agrees to cover the tax, but the IRS still treats the donor as the legally responsible party. If the donor doesn’t pay, the IRS can pursue the recipient under transferee liability rules that allow collection from anyone who received property for less than full value.12Internal Revenue Service. Transferee Liability Cases
When You Still Have to File
You need to file IRS Form 709 any year you give more than $19,000 to a single recipient, elect gift splitting with your spouse, or give a gift of a future interest in property.13Internal Revenue Service. Instructions for Form 709 Filing is required even when no tax is owed, because the form documents how much of your $15 million lifetime exemption you have used.
Form 709 is due April 15 of the year after the gift. An income tax extension filed on Form 4868 automatically extends the gift tax return too. The form cannot be e-filed; it has to be mailed. Keep copies indefinitely, because the running total of lifetime exemption used comes from those returns, and the IRS may reference them decades later when reviewing an estate.
One more reason to file even when the tax is zero: the three-year statute of limitations for the IRS to challenge a gift only starts running once an adequately disclosed Form 709 is on file.14Office of the Law Revision Counsel. 26 USC 6501 – Limitations on Assessment and Collection Skip the filing and that clock never starts.