What Is the Gift Tax? Definition, Limits, Example

What Is the Gift Tax?

By Adam Levy – Updated Sep 14, 2025 at 11:14 PM EST

Key Points

File Form 709 for gifts over $19,000 to one individual, under annual gift tax exclusion rules.
Use lifetime gift tax exclusion of $13.99M before gift tax applies, adjusting yearly for inflation.
Split gifts between spouses or use trusts to maximize non-taxable gifts under annual limits.

The gift tax is a tax on the transfer of property to someone else while receiving nothing (or less than full value) in return. The gift tax is typically paid by the giver, not the person receiving the gift. There are several factors that can affect the amount someone has to pay on their gifts.

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Tax documents on a desk with a pen, calculator, and note that says Tax Time. — Image source: Getty Images.

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Source: IRS

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Understanding Taxation of Your Retirement Income

Just because you're retired doesn't mean you're living tax-free.

Primary vs. Contingent Beneficiaries: What You Need to Know

Primary beneficiaries are the first ones to inherit your assets upon your death; contingent beneficiaries are second in line.

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How to Gift Stock

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Beneficiary

A person or legal entity that receives benefits or advantages from something, most commonly a trust, will, or life insurance policy.

Also, 529 plans allow you to fund them with as much as five years of annual gift tax exemptions. The catch is that you cannot gift the beneficiary more within those five years without having to file Form 709. If you want to pay for someone's school tuition directly, that amount isn't subject to the gift tax, either.

You can contribute to non-profit organizations or political campaigns without concern for the gift tax. Additionally, you can pay someone else's medical bills without worrying about the gift tax.

With the Tax Cuts and Jobs Act set to expire in 2026, some may consider using the higher lifetime exclusion. That could involve you and a spouse funding a trust with up to twice the lifetime exclusion in 2025, which could be well more than $27 million in total. This is a risky strategy as there's always the possibility that Congress will change tax laws before you and your spouse pass away.

Only the ultra-wealthy need to go that far in planning their estates and avoiding taxes. But even the middle class could benefit from a few of the other gifting strategies.

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About the Author

Adam Levy is a contributing Motley Fool stock market analyst covering technology, consumer, and financial stocks and how policy, economic, and consumer trends shape personal finance, Social Security and retirement savings. Before The Motley Fool, Adam was a financial advisor at Edward Jones. He studied finance and electrical engineering at Carnegie Mellon University.

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