What Is the Lifetime Gift Tax Exemption for 2025?

They say it’s better to give than to receive. But when you’re the one doing the giving, there are some extra considerations that you’ll have to take into account – like the gift tax and the lifetime gift tax exemption. The lifetime gift tax exemption looks at how your gifts accumulate throughout your lifetime, helping you avoid gift and estate taxes. When making sizable gifts, it’s important to know about the laws surrounding the gift tax so that you don’t end up with any surprising tax bills or other difficulties.

Do you have questions about how to navigate gift taxes? Speak with a financial advisor today.

What Is the Lifetime Gift Tax Exemption?

The lifetime gift tax exemption is the amount of money or assets the government allows you to give away over the course of your lifetime without having to pay the federal gift tax. Gift tax applies when one person transfers money or property to someone else, without expectation of receiving something of equal value in return. The gifter, not the recipient, pays the tax.

Prior to 2017, the lifetime gift tax exemption was set at $5.49 million. The Tax Cut and Jobs Act of 2017 doubled the limits for tax years 2018 through 2025, while also allowing for annual inflation adjustments. Trump’s tax plan, otherwise known as the One Big Beautiful Bill (OBBB), makes the increases permanent.

For the 2025 tax year, the lifetime gift tax exemption limit is $13.99 million, doubling to $27.98 million for married couples filing a joint return.
Beginning in 2026, individuals can claim a lifetime exemption limit of $15 million, doubling to $30 million for married couples.

The exemption limits will continue to be adjusted for inflation under the OBBB.

An important thing to remember is that even if you don’t come close to exceeding this exemption, you still may be required to file gift tax returns if your gifts exceed the annual exclusion limits. The annual exclusion limit per donee is $19,000, as of 2025. If you aren’t sure if you should be filing a gift tax return, you may want to check with a financial advisor.

Lifetime Gift Tax Exemption and Estate Tax

Estate planning strategies commonly include lifetime gift tax exemptions.

The lifetime gift tax exemption ties directly to the federal estate tax. The federal estate tax kicks in for estates that are worth more than $13.99 million in 2025, the same amount as the lifetime gift tax exemption. The federal estate tax exemption is transferable between spouses, meaning that if the second spouse in a married couple dies in 2024, their estate can effectively have a $27.98 million exemption.

Gifts made in 2025 that exceed the $19,000 annual exclusion limit per recipient reduce your federal gift/estate tax exemption when you die. Here’s an example.

Let’s say you give your grandson a gift of $25,000 in 2025. The first $19,000 is not taxable because of the annual exclusion. After that, the remaining $6,000 counts against both your lifetime gift tax exemption and your federal estate tax exemption. So when you die, your federal estate tax exemption will be $13,984,000. Once that lifetime exemption is exhausted, the federal gift and estate taxes will apply.

The OBBB allows for the higher lifetime exclusion limits outlined above, but made no changes to the estate tax rate. The highest federal estate tax rate is 40%; states may also impose estate tax at varying rates.

What Gifts Are Always Exempt From Taxes?

Certain gifts are not considered taxable. These include:

Gifts that do not exceed the annual gift tax exclusion limit
Gifts to charities approved by the IRS
A gift to your spouse, if they’re a U.S. citizen
Tuition you pay on behalf of someone else, if paid directly to the school
Gifts to cover someone’s medical expenses, if paid directly to the medical facility
Donations to a political organization

Because gifts in one of these categories are always exempt from the federal gift tax, you don’t need to report them to the IRS. Additionally, gifts to qualifying charities can be deducted from the total amount of gifts you made.

Do States Have Gift Taxes?

Connecticut is now the only state to currently levy a gift tax, which is 12% of the excess over the federal lifetime gift tax exemption limit. That state previously had a $9.1 million lifetime exemption but this exemption now matches the federal limit ($13.99 million in 2025).

Several states used to have gift taxes. Minnesota passed a gift tax in 2013 but then repealed it less than a year later. Tennessee repealed its gift tax in 2012. Residents of all states, of course, still have to abide by federal gift tax laws.

How to Handle Gifts That Exceed the Annual Limit

When you give someone a large gift in a given year—more than what’s allowed under the annual exclusion—you must inform the IRS by completing the proper paperwork. This does not automatically mean you owe taxes, but it does require documentation for tax purposes.

The IRS requires a specific form, Form 709, to record gifts that go over the exclusion threshold for any one person in a single year. This form tracks how much of your lifetime exemption you’ve used. Although no tax is typically due at the time of the gift, accurate reporting is still required.

Here are a few tips for handling gifts in excess of the annual exclusion limit.

Couples can split gifts to avoid exceeding their individual annual exclusion limits, but each must file their own form to document what they contributed to the gift..Reporting isn’t necessary for gifts that aren’t subject to tax, such as direct tuition payments, even when they exceed the annual exclusion limit.
The annual exclusion limit is per recipient, not for the total of all your gifts. Only gifts above the limit would need to be reported.

Even if you’re far below the lifetime exemption amount, keeping up with gift reporting ensures that your records match the IRS’s. It also simplifies estate planning and reduces the chance of future confusion or audits. Keeping a clear, year-by-year record of your giving can help avoid problems down the road.

Do States Have Gift Taxes?

Connecticut is now the only state to currently levy a gift tax, which is 12%. It previously had a $9.1 million lifetime exemption as of 2022, but this exemption now matches the federal limit ($13.61 million in 2024).

Other Gift Tax Rules and Exclusions

The IRS allows you to exclude annual gifts from taxes up to a limit.

The annual gift tax exclusion for 2025 is $19,000 ($18,000 in 2024), but the IRS allows for inflation adjustments to this number. So, the amount you may be able to give without triggering the gift tax in future years may increase.

The IRS allows a special provision for exceeding the annual limit if you’re contributing to a 529 college savings plan. You may make up to five years’ worth of contributions in a single tax year, without the gift tax kicking in.

For example, say that you have four children, all of whom have a 529 plan. You could front load each of their plans with $95,000 ($19,000 x 5) and owe no gift tax. However, you wouldn’t be able to make additional contributions for five years. Be aware that if you exceed the annual gift tax exclusion, you’ll have to pay taxes on the gift. Rates range anywhere from 18% to 40%. The amount by which you exceeded the annual gift tax exclusion will also be deducted from your lifetime gift tax exemption and your federal estate tax exemption.

Bottom Line

Making financial gifts to someone can feel good, but not when there’s an unexpected tax bite. Understanding the annual and lifetime gift tax exclusion limits can help you plan your gifts accordingly, without resulting in a large tax bill.

Tax Planning Tips

If you’re wondering whether you owe gift taxes, you may want to talk to a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Before you think about the estate tax or the gift tax, you’ll probably have to think about your retirement taxes. Use SmartAsset’s retirement tax calculator to estimate how much you’ll owe based on the state in which you live.