Executive Summary: You can gift up to $20,000 per person each year without triggering a gift tax return. Giving more doesn’t mean you owe tax, but it does require paperwork. With smart planning like using both spouses’ limits, splitting gifts over two years, or paying tuition directly, you can give generously without causing a filing headache.
You don’t have to be a millionaire to give like one, but if you are, it helps to know the rules. Each year, people across Brunswick County ask the same question: “If I give my kids (or grandkids) money, do I have to pay a gift tax?” The short answer: probably not. The long answer? It depends on how much you give, how you give it, and whether you’re planning for the long haul.
Let’s clear it up.
1. Know the Magic Number: $20,000 per Person, per Year
In 2026, the IRS gift reporting threshold is $20,000 per recipient per year. That means you can give someone up to $20,000 in a calendar year without having to file anything. Go over that amount, even by a dollar, and you’re supposed to file IRS Form 709 (a gift tax return).
Important: Filing a gift tax return does not mean you owe any tax. It just means the gift counts against your lifetime exemption (currently $15 million). You won’t pay gift tax until you hit that number. But the paperwork matters, especially if your estate may eventually exceed that amount.
2. Use the Calendar to Your Advantage
Want to give more than $20,000? Time it right. You can give up to $20,000 to someone before December 31 and another $20,000 starting January 1. That’s $40,000 over two tax years, no filing needed.
3. Split the Gift with Your Spouse
Each person has their own $20,000 limit per recipient. That means a couple could each give $20,000 to the same person, $40,000 total in one calendar year without triggering the filing requirement. Want to go bigger? You can also give to the recipient’s spouse. For example, mom and dad each give $20,000 to their daughter and another $20,000 to their son-in-law. That’s $80,000 total with no gift tax return.
4. Don’t Hug the Line
Avoid giving exactly $20,000 per person. Gifts aren’t just checks. They can include birthday presents, dinners, vacations, and more. To stay safe, back off the limit a bit. Try $18,000 instead. That leaves room for any “incidental” gifts and makes audits (which are rare, but still possible) much less stressful.
5. Pay Bills Instead of Gifting Cash
Some types of payments don’t count as gifts at all so they don’t count toward your annual limit. If you pay someone’s medical bills or tuition directly to the provider (not to the person), it’s not considered a gift. That means you can still give that person up to $20,000, in addition to paying those bills.
6. File When You Have To, But Strategically
If you do go over the limit, that’s okay. Just be prepared to file Form 709 with your tax return. Most folks use a CPA for this, and there’s usually a fee. Technically, you’re supposed to file a separate return for each recipient you exceed the limit with. That can get tedious fast. Good planning and sticking to the limits can help avoid the hassle.
7. Think Long-Term if You Have a Larger Estate
If your estate could eventually exceed the current $15 million per person, federal estate tax exemption, gifting the less than $20K per year “under the radar” during your lifetime helps reduce the taxable portion. But it only works if you are under the radar amount each year. If you go over that amount then all those gifts including the $20K have to be reported, because they get added back into your estate tally when you die. Keep good records and report things properly.
If you’re planning to make larger gifts or want to use gifting as a long-term tax strategy, it’s worth getting professional guidance.
Giving money to your loved ones while you’re still around to enjoy the impact is one of life’s real joys. But it only works well if you understand the rules. B. Joseph Causey, Jr., Attorney at Law, can help you build a smart, simple plan that keeps your gifts easy and effective. Reach out today to get started.
Disclaimer: This firm does not provide tax advice. We recommend that you consult with a qualified CPA or tax advisor of your choosing for guidance on tax matters. We are happy to work alongside your tax professional to help ensure your estate plan aligns with your financial goals.