For most people, the answer to how much is gift tax comes out to zero. Federal gift tax rates run from 18% to 40%, but they only bite after you’ve cleared two large exclusions: $19,000 per recipient each year in 2026, and a $15 million lifetime exemption on top of that. The tax falls on the giver, not the recipient, and the vast majority of Americans never use enough of the lifetime figure to owe a dollar.
What You Can Give Each Year Tax-Free
The annual exclusion for 2026 is $19,000 per recipient.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Give any one person up to that amount and there’s no tax, no return, and no dent in your lifetime exemption. There’s no cap on how many recipients you can have. Ten people at $19,000 each moves $190,000 out of your name for the year with nothing owed and nothing to file.
The exclusion resets every calendar year, so the same donor can repeat the same gifts in January that they made in December.
Married couples can stack their exclusions through gift splitting and treat a single gift as coming half from each spouse. That doubles the per-recipient figure to $38,000 for 2026. Both spouses must consent, and both must file Form 709 for that year even when no tax is due.2Internal Revenue Service. Instructions for Form 709
The Lifetime Exemption Absorbs the Rest
Cross the annual amount and you still probably won’t owe anything. The excess draws down a lifetime exemption of $15 million per person in 2026, following the One, Big, Beautiful Bill signed into law on July 4, 2025.3Internal Revenue Service. What’s New – Estate and Gift Tax A married couple has up to $30 million combined.
Give a child $119,000 in 2026 and the math works like this: the first $19,000 uses the annual exclusion, and the remaining $100,000 reduces your lifetime exemption from $15 million to $14.9 million. You file Form 709 to record it, but you write no check to the IRS. Actual gift tax only comes out of pocket once the full $15 million is gone.
One important connection: the lifetime exemption is shared with the estate tax under what the IRS calls the unified credit. Whatever you spend on lifetime gifts is no longer available to shelter your estate at death.4Office of the Law Revision Counsel. 26 USC 2505 – Unified Credit Against Gift Tax
The Rates, If You Actually Get There
Once both exclusions are exhausted, the tax is progressive and cumulative across your lifetime. It starts at 18% on the first $10,000 of taxable gifts and climbs through a dozen brackets to 40% on amounts over $1 million.5Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax Because the calculation is cumulative, a donor who has already made $500,000 in taxable gifts is at 37% on the next taxable dollar. A $2 million taxable gift after the lifetime exemption is used up pays the full escalating schedule on the first $1 million and 40% on everything above that.
Gifts That Don’t Count Against Either Limit
Some transfers fall outside the gift tax system entirely, regardless of size.
Tuition and medical expenses. You can pay any amount of someone’s tuition or medical bills tax-free, but only if you pay the provider directly. Tuition means tuition — not room and board, not books, not supplies. Medical payments have to go to the hospital, doctor, or insurer; amounts later reimbursed by the recipient’s insurance lose the exclusion.6Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts7eCFR. 26 CFR 25.2503-6 – Exclusion for Certain Qualified Transfer for Tuition or Medical Expenses
Gifts to your spouse. Transfers between spouses who are both U.S. citizens qualify for an unlimited marital deduction.8Office of the Law Revision Counsel. 26 USC 2523 – Gift to Spouse If your spouse is not a U.S. citizen, the unlimited deduction doesn’t apply, but a higher annual exclusion of $194,000 for 2026 replaces the standard figure.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Charitable gifts. Gifts to qualified charities, religious organizations, and educational institutions are fully deductible from taxable gifts with no cap.9Office of the Law Revision Counsel. 26 USC 2522 – Charitable and Similar Gifts
Who Owes the Tax
The donor is legally responsible for filing the return and paying any tax. If the donor dies with tax unpaid, the obligation passes to the estate.10eCFR. 26 CFR Part 25 – Determination of Tax Liability
Recipients aren’t off the hook entirely. If the donor doesn’t pay, the IRS can pursue the recipient personally, up to the value of the gift received, and an automatic lien attaches to gifted property for 10 years from the date of the gift.11Office of the Law Revision Counsel. 26 USC 6324 – Special Liens for Estate and Gift Taxes This secondary liability is rare in practice, but it gives recipients a reason to confirm the donor filed properly.
When You Have to File Form 709
File Form 709 for any year in which you give more than $19,000 to a single recipient, elect to split gifts with your spouse, or transfer a future interest in property. Filing is required even when no tax is owed, because the form is what the IRS uses to track how much of your $15 million lifetime exemption you’ve used.2Internal Revenue Service. Instructions for Form 709
The return is due April 15 of the year after the gift. Form 8892 gets you an automatic six-month extension. Form 709 can be filed electronically through the Modernized e-File system or mailed to the IRS Service Center in Kansas City, Missouri.2Internal Revenue Service. Instructions for Form 709 Keep copies. You’ll need them to track remaining exemption, and your estate will need them later.
For non-cash gifts such as real estate or a stake in a private business, attach a qualified appraisal or a detailed explanation of how you valued the property. That disclosure matters for more than accuracy: it starts the clock on the IRS’s window to challenge you.
What Happens If You Skip the Return
The failure-to-file penalty is 5% of the unpaid tax for each month the return is late, capped at 25%, with interest running on top.12Internal Revenue Service. Failure to File Penalty
The bigger risk is time. A properly filed return with adequate disclosure gives the IRS three years to question the values you reported. Understate total gifts by more than 25% and the window stretches to six years. Leave a gift off the return entirely without adequate disclosure and there is no statute of limitations at all — the IRS can come back years or decades later.13Office of the Law Revision Counsel. 26 USC 6501 – Limitations on Assessment and Collection
A Note for Recipients: Basis Follows the Gift
Gift tax is the donor’s concern, but recipients face a separate issue when they later sell. You take over the donor’s original cost basis, not the value at the time of the gift. Stock the donor bought for $10,000 and gave to you at $50,000 leaves you with a $10,000 basis; sell at $50,000 and you have $40,000 of capital gain.14Internal Revenue Service. Property (Basis, Sale of Home, Etc.) Inherited property works differently, receiving a stepped-up basis at the date of death. Highly appreciated assets can therefore carry a larger future tax bill for a gift recipient than for an heir. If the donor paid gift tax on the transfer, the recipient’s basis increases by the portion of that tax attributable to appreciation. And where fair market value on the date of the gift is lower than the donor’s basis, a later sale at a loss uses the lower value.