Episode 46: How to Give Money Without Triggering Gift Tax

Written By Jillian Mastroianni

Episode 46

Host: Jill Mastroianni

How to Give Money Without Triggering Gift Tax

This Tuesday Triage episode breaks down how gift tax actually works, when a gift must be reported to the IRS, and why most people won’t owe gift tax but may need to file a gift tax return anyway. Using a real listener scenario, Jill explains what counts as a gift, what doesn’t, four major exceptions, and common year-end mistakes that can accidentally trigger IRS reporting rules. And, as always, she reminds us that not all gifts come wrapped. Sometimes the most meaningful gift is showing up.

What You’ll Learn in This Episode

  • What legally qualifies as a gift and why “taxable gift” does not automatically mean tax owed

  • The difference between gift tax (during life) and estate tax (after death) and how they are unified

  • Why most Americans will never owe gift tax due to the multi-million-dollar federal gift and estate tax exemption (~$14M per person in 2025)

    Which state still has a separate gift tax (and why it generally aligns with federal rules)

    Four major no-tax and no-reporting exceptions, including: charitable gifts to qualified 501(c)(3) organizations (not GoFundMe), annual exclusion gifts up to $19,000 per person in 2025, direct payments of tuition and medical expenses, and unlimited gifts to a U.S.-citizen spouse

    How gift splitting works for married couples and why it requires filing a gift tax return even if no tax is owed

    Why postmarks matter more than check dates (the mailbox rule)

    The Medicaid look-back risk and why gifting can hurt Medicaid long-term care eligibility

Resources & Links

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  • Jill Mastroianni (00:00): Before you start writing checks or Venmo’ing holiday gifts, let’s talk about the gift tax. Most people have heard of it, but very few actually understand when it applies, or who’s on the hook. Generous, well-intentioned gifts can still trigger reporting requirements with the IRS, even when no tax is owed. Today, we’re going to make sure your holiday cheer doesn’t come with surprise IRS paperwork.

    Welcome to the Death Readiness Podcast. This is not your dad’s estate planning podcast. I’m Jill Mastroianni, former estate attorney, current realist, and your guide to wills, trusts, probate and the conversations no one wants to have. If your Google search history includes, “Do I need a trust?” “What exactly is probate?” and “Am I supposed to do something with mom’s Will?” you’re in the right place.

    (00:59) This past weekend, my daughter was in her very first high school musical. She’s a freshman, and the show was Matilda. April was cast as one of Matilda’s classmates in the kid ensemble, and she was living her best theater-kid life.

    My dad, my brother, and my dad’s partner Sarah drove ten hours from the Adirondack Mountains, through Canada, all the way to southeastern Michigan just to watch her perform. Sarah even lent April the white button-down shirt she needed for her schoolgirl costume. Because April had late-night rehearsals, they saw her perform, gave her a big hug and a bouquet of pink roses, and then turned around and drove right back home the next morning.

    Today we’re talking about gifts and the federal gift tax, but as we head into the holiday season, it’s worth remembering that not all gifts come wrapped or deposited through Venmo. When April rounded the corner after that first performance, she was glowing, and so were her grandfather, her Uncle Dan, and Sarah.

    (02:07) Sometimes the greatest gift is simply showing up. And while health, timing, and life circumstances don’t always allow that, when you can show up, even if it takes ten hours in a car and two international border crossings, it means more than anything you can buy.

    If you want your family to have answers instead of a scavenger hunt, jump on the waitlist for The Death Readiness Playbook. This holiday season, give the gift the IRS can’t tax—clarity, instructions, and a plan that won’t disappear into a drawer. The Playbook is almost ready, loaded with bite-sized steps, talking points, and templates that make planning approachable instead of overwhelming. To get on the waitlist and be first in line when it releases, go to deathreadiness.com/playbook. The link is in the show notes.

    Today’s question comes from Bethany, an immigration attorney in Washington state. Like many lawyers, Bethany becomes the go-to person for all kinds of legal questions, even those far outside her practice area. Recently, a family friend reached out to Bethany because she wants to write a check to each of her nieces and nephews this year and isn’t sure whether she’d owe gift tax.

    (03:25) Let’s see if we can help Bethany, and her family friend, out. For purposes of this Tuesday Triage, we’re going to call the family friend Becky, and like Bethany, she also lives in Washington state.

    Today we’re talking specifically about the federal gift tax. In many areas of tax law, rules can vary from state to state, but when it comes to gift tax, you’re in luck: 49 states do not have a separate state-level gift tax.

    There is one state that still does — Connecticut — but don’t panic if you live there. Connecticut’s law mirrors the federal system: the gift and estate tax are unified, lifetime gifts reduce the amount you can pass tax-free at death, and the exemption matches the federal exemption amount, approximately $14 million per person in 2025. So even in Connecticut, most people won’t owe gift tax, although some may need to file a state gift tax return, depending on the size of their gifts.

    Before we go any further, let’s define what actually counts as a gift.

    (04:39) A gift is any transfer where you give someone something and receive nothing in return or less than the fair market value of what you transferred in return.

    For example, let’s say I give my cousin a new car and she thanks me with a handwritten note and a homemade pie. The fair market value of the pie is way less than the fair market value of the car. So even though my cousin’s gesture is sweet and thoughtful, my gift of the car is still considered a taxable gift.

    Gift tax applies to transfers made while you’re alive, whereas estate tax applies to transfers made after your death. And here’s where people often get confused: when I say a gift is taxable, that does not automatically mean you owe gift tax. A “taxable gift” simply means that you’re using up some of your lifetime gift and estate tax exemption.

    (05:41) The gift tax exemption and estate tax exemption are unified, meaning the more taxable gifts you make during your life, the less exemption you have available at death.

    And that exemption is very, very large, roughly $14 million dollars per person in 2025. In other words, you can give away a combined total of $14 million dollars during life and at death and still avoid ever owing federal gift or estate tax.

    Here’s an oversimplified example: let’s pretend I die in 2025. I’m 43, and in real life I haven’t made any taxable gifts. But let’s imagine I had given away $6 million dollars in taxable gifts during my lifetime. If the combined lifetime–plus–post-death limit is $14 million dollars, I could still pass another $8 million dollars at death without owing any tax. But if I die with $9 million dollars, that extra $1 million dollars above my $14 million dollar limit would be subject to estate tax.

    (06:58) So now that we’ve defined what a gift is, let’s talk about the exceptions because some transfers don’t count as gifts at all for gift tax purposes.

    Before we get into the four key exceptions to the gift tax, here’s a quick caveat. I’m talking about gifts made directly and outright to another person. Gifts made to a trust might also qualify, but those rules are more nuanced and outside the scope of today’s Tuesday Triage.

    Exception #1: Gifts to qualifying charities are not taxable gifts.

    If I make a gift to the American Red Cross, St. Jude Children’s Research Hospital, or another qualified 501(c)(3) organization, the IRS treats that as a charitable donation, not a gift. You can give as much as you want to qualifying charities and none of it counts against your gift tax exemption.

    (08:05) But you know what doesn’t count as a qualifying charity? Your neighbor’s GoFundMe account. Even if it’s for a heartbreaking or noble cause, a GoFundMe set up for an individual is not a qualified charity for gift tax purposes.

    Here’s an example from my own life: When my husband and I got married, at ages 35 and 40, we didn’t need anything. No new dishes, no monogrammed towels, not even an ice cream maker. But we knew some guests would really want to give something, so we set up a GoFundMe account and split the money between the two dog rescues where we adopted each of our dogs at the time, Oliver and Artie.

    We gave half to Weimaraner Rescue of the South, where I got Oliver, and half to Hero Dog Rescue, where my husband Jeremy got Artie, both of which are valid charitable organizations.

    (09:06) But here’s the catch — the GoFundMe account was in my husband Jeremy’s name, and Jeremy is not a charity. The IRS cares about where the money goes first, not where it goes eventually. With GoFundMe and similar platforms, the “first stop” is usually an individual, and that makes a difference for gift tax treatment.

    Exception #2: Gifts within the annual exclusion amount are not taxable gifts.

    Each year, the IRS allows you to give up to a certain amount per person, per calendar year, without it counting as a taxable gift. For 2025, this annual exclusion amount is $19,000 dollars per recipient.

    So if Becky wants to give each niece and nephew up to $19,000 dollars, she can, and she could also give that same amount to any number of other people, without using any of her lifetime exemption and without filing a gift tax return.

    (10:13) Now, let’s assume Becky is married. If she and her spouse want to give $38,000 to each niece and nephew, they can use a strategy called gift splitting. However, gift splitting requires both spouses to file a gift tax return and formally consent to the gift-splitting arrangement, so it’s not quite as simple as just doubling the number.

    Returning to my GoFundMe example: when Jeremy and I were married in 2017, the annual exclusion amount was $14,000 per person. Even though GoFundMe wasn’t a qualifying charity, our guests were generous within that $14,000 annual limit so no one made a taxable gift.

    Exception #3: Tuition and medical expenses paid directly to the provider are not taxable gifts.

    If you pay tuition or qualified medical expenses for someone directly to the school, medical provider, or insurance company, those payments are not considered taxable gifts, even if the payments are substantial.

    (11:31) For education, this exclusion applies only to tuition itself, whether the student is full-time or part-time. It does not include books, supplies, laptops, athletic fees, dorm costs, meal plans, or other related expenses, just tuition billed by the educational institution.

    For medical expenses, the exclusion covers payments related to the diagnosis, cure, mitigation, treatment, or prevention of disease, including transportation necessary for medical care, as long as these expenses are not otherwise reimbursed by insurance. This exclusion also applies to health insurance premiums paid on someone else’s behalf, and given today’s costs, that might be one of the most meaningful gifts someone could receive.

    (12:27) The key requirement is that you must pay the provider directly. You cannot write a check to your daughter so she can pay your granddaughter’s tuition. The payment must go straight to the college, hospital, doctor, or insurance company.

    Exception #4: You may make unlimited gifts to a U.S. citizen spouse.

    If your spouse is a U.S. citizen, you can give them an unlimited amount during your lifetime without triggering the gift tax rules. So if Becky were married to a U.S. citizen and wanted to give her spouse $100 million dollars, she could, with no gift tax consequences.

    So for anyone married to a U.S. citizen, neither the IRS nor the gift tax is limiting your generosity toward your spouse this holiday season.

    (13:21) What about children who are still minors? Well, when you provide support to a minor child, it should not be treated as a taxable gift because you have an obligation to provide support to your minor child under state law; otherwise, gifts to minor children are subject to the same rules as gifts to any other individual other than a US citizen spouse.

    Now, let’s get back to Becky’s original question. Becky lives in Washington state and wants to write a check to each of her nieces and nephews. Her question is whether she would need to pay gift tax.

    First things first: Who pays the gift tax, if it’s owed? It’s the gift-giver, not the recipient who pays the gift tax. So in this case, Becky would be the one responsible for any gift tax, not her nieces and nephews.

    (14:23) Next, we need to know how much her gifts will be. If each check is $19,000 dollars or less, she’s within the 2025 annual exclusion amount, and she’s not making a taxable gift.

    But what if Becky plans to give $50,000 dollars to each niece and nephew? Does she owe any gift tax?

    Let’s break it down.

    First, we need to calculate the taxable portion of Becky’s gift to each niece and nephew. She’s giving $50,000 dollars to each of them, and the annual exclusion for 2025 is $19,000 dollars. So we subtract $19,000 dollars from $50,000 dollars, leaving $31,000 dollars as the taxable gift per person.

    So, yes, Becky is making a taxable gift. But does she owe any gift tax? Maybe, maybe not. It depends on how much she has already given away during her lifetime.

    (15:32) Remember, Becky can give up to about $14 million dollars in taxable gifts over her lifetime before any gift tax is actually owed. So, if the total taxable gifts she’s made to date are below that $14 million dollar threshold, she will not owe any gift tax.

    However, because she has made a taxable gift (meaning it exceeds the annual exclusion amount), she does have to file a federal gift tax return. The requirement to file kicks in as soon as the annual exclusion limit is exceeded, even if no tax is due.

    Why? Because the IRS needs a way to track how much of your lifetime exemption you’ve used. Think of the gift tax return as the IRS’ running ledger of lifetime gifts. Each time you file, you report prior taxable gifts so the IRS can keep a cumulative total. 

    (16:36) If, one day, a gift pushes you over your lifetime exemption amount, that is the moment when gift tax becomes due.

    And based on the fact that Becky is asking Bethany, an immigration attorney, how this works, it’s probably safe to assume she hasn’t been making multimillion-dollar gifts throughout her lifetime. So my educated guess is that Becky does not owe any gift tax.

    Now, what happens if Becky gets overwhelmed this holiday season and never gets around to writing the checks?

    Imagine it’s now January 2nd, and Becky still hasn’t made her gifts. Her plan was to give $19,000 dollars to each niece and nephew in 2025, and another $19,000 dollars to each of them in 2026, all within the annual exclusion each year.

    (17:34) Becky is too late to make the 2025 gifts, but what if she tries to get clever? Let’s say she mails the checks on January 3rd, but dates them December 31, 2025. Can she count those as 2025 gifts?

    Do you think the IRS has maybe, just maybe, seen this move before?

    Here’s the rule: for mailed checks, the gift date is the postmarked date, not the date written on the check. This is known as the mailbox rule, and yes, it’s a real thing backed by a Treasury Regulation.

    So if the envelope is postmarked January 3rd, it counts as a 2026 gift, even if the check is dated December 31, 2025.

    (18:34) Now, what if Becky tries something different? Suppose she sees all her nieces and nephews on Thanksgiving 2025 and hands out two checks per person, one dated November 27, 2025, and one dated January 1, 2026, hoping to lock in gifts in two separate calendar years.

    When you hand someone a check, the gift is made on the date of delivery, unless the check is post-dated. If it’s post-dated, the gift is made on the future date written on the check, not the day it was handed over.

    So, Becky will be treated as making a gift in 2025 and making a separate gift in 2026 even though she gave her nieces and nephews both checks in 2025.

    (19:31) We’ve spent a lot of time today covering gift tax. But gift tax rules aren’t the only consideration when giving money away, particularly for anyone who may eventually apply for long-term care benefits through Medicaid. If you give away assets within five years of applying for Medicaid, you may trigger a penalty period, which is a stretch of time when Medicaid will not pay for your care despite you being eligible otherwise. For more details, listen to Episode 20: “What You Need to Know About Medicaid and Protecting Your Mom’s House.” I’ll link it to it in the show notes.

    Gifts come in many forms: money, time, attention, presence, and sometimes a ten-hour drive through two countries just to watch a 2-hour high school musical. The IRS only regulates one of those. The others are measured in memories, impact, and the feeling of being seen. So when you can, give both, the practical gift and the meaningful one, because the dollar amount may be forgotten, but the showing-up part won’t be.

    (20:46) As you think about the gifts you give this season, consider giving one your family will appreciate long after the wrapping paper is gone. The Death Readiness Playbook is almost here, a workbook filled with simple steps, talking points, and templates to make planning realistic and manageable. If you’d like your family to have answers instead of a scavenger hunt, join the waitlist at deathreadiness.com/playbook. That’s deathreadiness.com/playbook. The link is in the show notes.

    And, if you have a question you’d like me to answer on a future Tuesday Triage episode, submit it at deathreadiness.com/tuesdaytriage. That’s deathreadiness.com/tuesdaytriage. The link is in the show notes.

    Thanks for listening today.

    This is Death Readiness, real, messy and yours to own. I’m Jill Mastroianni and I’m here to help you sort through it, especially when you don’t know where to start.

    (21:48) Hi, I'm April, Jill's daughter. Thanks for listening to The Death Readiness Podcast.  While my mom is an attorney, she’s not your attorney.  The Death Readiness Podcast is for educational and entertainment purposes only.   It does not provide legal advice.  For legal guidance tailored to your unique situation, consult with a licensed attorney in your state.  To learn more about the services my mom offers, visit DeathReadiness.com.

Jillian Mastroianni
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