How to Give Money Without Triggering Gift Tax

As we head into the season of giving, there’s always a moment where generosity bumps up against a familiar question: “Is this going to trigger gift tax?” Most people have heard of the gift tax, but very few understand how it actually works. And nearly everyone assumes it applies far more often than it really does. Before you write a check, Venmo your niece, or help with a tuition bill, it’s worth understanding what the IRS considers a “gift,” which gifts are entirely tax-free, and when you need to file a gift tax return.

This topic landed in my inbox through a listener question from Bethany, an immigration attorney in Washington state. Like many lawyers, she’s become the unofficial “legal help desk” for friends and family. One of those friends, whom we’ll call Becky, wants to write a check to each of her nieces and nephews this year and isn’t sure whether she’ll owe gift tax. It’s a common worry, especially around the holidays, and it’s one that can be cleared up pretty quickly once you know the basics.

Before we go any further, here’s the simplest definition of a gift: if you give someone something and you receive nothing (or less than what you gave) in return, it’s a gift for IRS purposes. That’s it. And just because something is a taxable gift does not mean you owe any gift tax. “Taxable” simply means the gift counts against your lifetime gift and estate tax exemption, which is enormous. In 2025, that exemption is roughly $14 million per person. That means you can give away up to $14 million during your life and at death combined before ever owing federal gift or estate tax. Most people will never come close to that limit.

That said, there are several important exceptions, categories of transfers that don’t count as gifts at all. Gifts to qualifying charities are unlimited and never reduce your exemption. Annual gifts under the annual exclusion amount of $19,000 per person in 2025 are completely ignored for gift tax purposes. You can give $19,000 to each niece and nephew, to each friend, to each coworker, to anyone, without filing a gift tax return. Married couples can double that with a strategy called gift-splitting, though they must file a gift tax return to do so.

Paying someone’s tuition or medical expenses directly to the provider also falls outside the gift tax rules. If you pay a granddaughter’s tuition to the college, that’s not a gift. If you write her the check and she pays it, then it’s a gift. Same for medical bills and even health insurance premiums. These rules can be incredibly helpful for families trying to support each other without complicating tax filings.

You can also make unlimited gifts to a U.S. citizen spouse. So if your spouse is a U.S. citizen and you transfer assets to them, none of it is subject to the gift tax system. And for minor children, support you’re legally obligated to provide—food, clothing, shelter, education—also does not count as a gift. Beyond required support, the usual gift rules apply.

Let’s return to Becky’s situation. She lives in Washington, a state with no separate state-level gift tax, and she wants to write checks to her nieces and nephews. If she gives each of them $19,000 or less, she’s within the annual exclusion and does not need to file a gift tax return. If she gives more—say $50,000 to each—only the portion above $19,000 counts as a taxable gift. Even though she will probably not owe any gift tax; she’ll just need to file Form 709 federal gift tax return so the IRS can keep track of how much of her lifetime gift exemption she has used.

Here’s an important detail about timing: for mailed checks, the gift date is the postmark date, not the date written on the check. So backdating a December check that gets mailed in January won’t “count” for the prior year. But, if you hand someone a check in November dated for January 1 of the following year, the gift is effective on January 1. These rules seem small but matter enormously when families try to maximize annual exclusions across calendar years.

While this episode focuses on gift tax, it’s impossible to ignore another important implication: Medicaid. Gifts made within five years of applying for long-term care Medicaid can trigger a penalty period during which Medicaid will not pay for care. Gifting should always be considered in the broader context of long-term care needs. For anyone concerned about Medicaid eligibility, I cover it in more detail in Episode 20 of the podcast. What You Need to Know about Medicaid and Protecting Your Mom’s House.

Most people can give generously without ever owing gift tax. The real value is understanding the difference between gifts that require IRS paperwork and those that don’t, and making sure your generosity aligns with your broader financial and estate planning goals.

Listen to the full episode here: