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Key Facts
- 2026 federal amount: The annual exclusion is $19,000 per recipient, not a single annual ceiling on everything a donor gives.
- 2026 federal amount: The basic exclusion amount is $15 million; using it during life generally reduces what remains available for federal estate and gift tax purposes.
- Who pays: The donor is generally responsible for federal gift tax and any required Form 709.
- Filing is not the same as paying: A gift can require a return even when the donor’s available exclusion prevents current tax.
- Valuation matters: Property is generally measured at its value on the gift date, and a bargain transfer can contain a gift.
Federal gift tax is a transfer tax on property given during life. It is easy to confuse its annual exclusion, lifetime exclusion, return-filing rules, and tax rates. Those are separate parts of one system: exceeding the annual exclusion often creates reporting and uses lifetime exclusion, but it does not automatically produce a tax bill.
What counts as a gift
A gift is not limited to cash in an envelope. Federal law can reach direct or indirect transfers of real or personal property. When property is transferred for less than full consideration, the difference between its value and what the recipient paid can be treated as a gift.
Examples can include forgiving a debt, transferring investments, adding value to another person’s ownership interest, or selling property below fair market value. Ownership structure, retained rights, and the timing of a completed transfer can change the analysis, so documents and valuations matter.
The 2026 annual exclusion
For gifts made in 2026, the federal annual exclusion is $19,000 per recipient. A donor may generally give up to that amount to each of several recipients without using the donor’s lifetime basic exclusion. The exclusion ordinarily requires a present interest, meaning the recipient has a current right to use or enjoy the property; future interests can require reporting even at lower values.
Each spouse has a separate annual exclusion. Thus, two spouses can together transfer $38,000 to one recipient in 2026 when each is treated as making a $19,000 gift. Gift splitting can treat qualifying gifts by one spouse as made one-half by each, but both spouses must consent and Form 709 filing rules apply. Spouses do not file a joint gift tax return.
Direct tuition and medical payments
Qualified tuition paid directly to an educational organization and qualified medical expenses paid directly to the provider can be excluded without consuming the annual exclusion. Giving money to the student or patient first is not the same as paying the institution or provider directly. Room, board, books, and similar education costs are not tuition for this exclusion.
Gifts to a U.S.-citizen spouse generally qualify for the marital deduction, while transfers to a noncitizen spouse have separate limits and requirements. Qualifying charitable transfers and gifts to political organizations also follow distinct rules.
The $15 million basic exclusion in 2026
The 2026 federal basic exclusion amount is $15 million. This is not an additional amount that resets annually. Taxable gifts accumulated over a donor’s lifetime are taken into account in the unified federal estate-and-gift tax calculation. A reportable gift above an available annual exclusion can use part of the basic exclusion, leaving less available later.
For example, if one donor gives an adult child $119,000 in cash during 2026 and the entire gift is a present interest, the first $19,000 can fall within the annual exclusion. The remaining $100,000 is generally a taxable gift for reporting purposes. If the donor has sufficient basic exclusion available, the return may apply credit so no current gift tax is payable.
The federal rate schedule is graduated and reaches 40% for cumulative taxable transfers above $1 million before the unified credit is applied. Calling 40% “the gift tax rate” misses the role of the credit and prior taxable gifts.
When Form 709 is generally required
A U.S. citizen or resident generally files Form 709 when gifts to one recipient exceed the annual exclusion, when making a future-interest gift, or when electing gift splitting. Other reportable transfers and generation-skipping transfer rules can also require the form. Each donor files separately for each calendar year.
Form 709 is generally due April 15 of the year after the gift. An extension to file a federal income tax return also extends the time to file Form 709, or Form 8892 can request a gift-tax filing extension when no income-tax extension is requested. An extension to file does not by itself extend the time to pay gift tax.
A complete return should identify the transferred property and valuation method. Appraisals, transfer documents, and explanations of unusual or partially gifted transactions may be necessary. Adequate disclosure is especially important where value is uncertain.
Property gifts can create later income-tax consequences
The recipient usually does not include the value of an ordinary gift in federal gross income merely because it was received. But gifted property generally carries the donor’s basis for calculating gain, subject to special rules including a separate loss limitation when fair market value was below basis on the gift date. The recipient should retain the donor’s basis records, acquisition date, gift-date value, and any gift-tax information.
That treatment differs from the basis rules commonly applicable to inherited property. For the transfer-tax side, see the site’s overview of the federal estate tax.
Federal and state boundaries
This article covers federal gift tax. A state may have separate estate, inheritance, income-tax, property-transfer, or reporting consequences even when it has no stand-alone gift tax. Federal exclusions and Form 709 do not prove compliance with state law.
Practical records to keep
- The date and description of each transfer.
- The recipient and value allocated to that recipient.
- Appraisals and evidence of fair market value.
- The donor’s basis and acquisition records for property.
- Proof that tuition or medical costs were paid directly to the qualifying organization or provider.
- Copies of Forms 709, attachments, spouse consents, and delivery confirmation.
