Imagine the joy of giving in a way that truly matters to others. Cherished gifts often empower, connect, and create lasting memories. If you’re looking for meaningful ways to support your loved ones financially in 2025, understanding the Annual Gift Tax Exclusion can be a powerful tool to align your generosity with smart, tax-efficient planning. Explore ways to give with your heart and align your generosity with meaningful impact.
Learning Points
Annual Gift Tax Exclusion: Aligning Your Values and Goals
Giving a truly thoughtful gift, one that considers your loved one’s needs or interests, can be an absolute joy. A personalized gift that provides an experience, an opportunity, or even a capability is truly special.
You probably remember a gift, or experience, that was just special. A gift that brought you joy, excitement, or made life easier.
Chances are your memorable gift wasn’t a thing. It wasn’t an object. It wasn’t tangible.
You probably did something different. Maybe you spent time with someone you love in a unique setting. Or you experienced a family travel tradition when you reached a certain age. You made memories.
So, when you apply those experiences to your own life today, you can think about ways to:
- Create deeper connection with your family and loved ones.
- Give your money meaning.
- Align your wealth with your thoughtful, generous spirit.
If you’re considering ways to significantly support your family or loved ones financially in 2025 and beyond, it’s worth considering tax-efficient approaches, like planning within the limits of the annual gift tax exclusion, that align with your values.
Because this topic, like so many others in financial planning, intersects with the world of tax, make sure you coordinate with a qualified tax professional.
What is Gifting?
When you understand the basics of tax-efficient approaches, you can then incorporate the details of your own life and make the puzzle pieces fit together.
The Internal Revenue Service (IRS) levies a federal gift tax on the transfer of property from one individual to another while receiving nothing, or less than full value, in return. There is a donor who transfers the property.
There is also the gift recipient who receives the transferred property. This is sometimes referred to as the donee.
Gifted property can take different forms. For example, you can gift cash/checks, real estate, stocks, or any other asset. Additionally, the IRS states that you can make a gift when you give the use of or income from a property, without expecting to receive something of at least equal value in return.
If you’re considering gifting appreciated assets, you might want to reconsider transferring them via an inheritance. This could allow the recipient of the assets to receive a step-up in basis to the fair market value at the time of the original holder’s death. Gifting an appreciated asset during your lifetime does not allow this to happen.
With this as background, let’s explore some key concepts you will want to evaluate before giving a substantial gift in 2025.
Annual Gift Tax Exclusion in 2025
This is a provision that allows you to give a certain amount of money or property to someone each year without incurring any gift tax.
For tax year 2025, this annual gift exclusion is set at $19,000 per recipient 1. This means that you could give $19,000 to your child, another $19,000 to a friend, and so forth, all without the burden of gift tax reporting and taxes.
Specifically, the first $19,000 worth of ‘gifts of present interest’ to each recipient during the calendar year is subtracted from total gifts to determine the value of taxable gifts.
All the gifts you make to a recipient during the calendar year are fully excluded under the annual exclusion if:
- they are all gifts of present interest, and
- they total $19,000 or less.
To help solidify this, here are some hypothetical examples that each assume you made no other gifts in 2025.
Annual Gift Tax Exclusion, 2025 Example: 529 Contributions
When you make one $19,000 contribution to your child’s 529 account. You’ve used the entire $19,000 annual gift exclusion.
Annual Gift Tax Exclusion, 2025 Example: Wedding Gift to Sister
When you give your sister a check for $5,000 and order $4,000 worth of items off her wedding registry. In this example, you’ve used $9,000 of the $19,000 annual gift exclusion.
Annual Gift Tax Exclusion, 2025 Example: Birthday Gift to Niece
When you give your niece a $10,000 check in person at their birthday party. You’ve used $10,000 of the $19,000 annual gift exclusion.
Annual Gift Tax Exclusion, 2025 Example: Annual Gifts to Nephew
When you contribute $8,000 to your nephew’s 529 account, a check for $1,000 for his birthday, and a $2,000 for his graduation. In this example, you’ve used $11,000 of the $19,000 annual gift exclusion.
Annual Gift Tax Exclusion, 2025 Example: Annual Gifts to Multiple Grandchildren
When you contribute $19,000 to each grandchild’s 529 account, you’ve used your entire $19,000 annual gift exclusion for each grandchild.
What if you and your spouse want to give more than $19,000 to an individual person? Gift splitting is an option.
Annual Gift Splitting
Married couples can effectively double the annual gift exclusion by “splitting” gifts.
This allows each spouse to contribute up to the annual exclusion amount to the same individual, effectively doubling the total amount gifted.
For example, in 2025, a married couple could jointly gift up to $38,000 to an individual using this approach.
When might this approach align with your goals? Perhaps you want to gift $25,000 in 2025 to your niece to jumpstart her consulting business.
If you individually gift $25,000 to your niece, the first $19,000 fits within the annual gift exclusion. You would need to report the remaining $6,000 to the IRS. Your lifetime gift tax exemption, discussed below, is reduced by $6,000.
If you elect to gift split this with your spouse, it fits within the joint gifting limits.
In both cases, this assumes you made no other gifts to your niece in 2025.
The table below shows the recent history of the annual gift exclusion amount available from 2011 through 2025 for i) Individuals and ii) spouses who elect gift splitting.
Table: Annual Gift Tax Exclusion per Donee for Year of Gift
| Year of Gift | Annual Gift Tax Exclusion per Donee | Annual Gift Tax Exclusion Total per Donee (from 2 spouses) |
|---|---|---|
| 2011 through 2012 | $13,000 | $26,000 |
| 2013 through 2017 | $14,000 | $28,000 |
| 2018 through 2021 | $15,000 | $30,000 |
| 2022 | $16,000 | $32,000 |
| 2023 | $17,000 | $34,000 |
| 2024 | $18,000 | $36,000 |
| 2025 | $19,000 | $38,000 |
Lifetime Gift Tax Exemption
In addition to your annual gift exclusion, you also have a lifetime gift tax exemption. This allows you to gift a certain amount over your lifetime without incurring gift tax. This is a cumulative dollar amount that you can give away over the course of your lifetime without owing any gift tax.
For 2025, the individual federal taxable estate threshold is $13,990,000. For many taxpayers in the United States, $13,990,000 is a substantial amount of wealth.
For married couples, estates of decedents survived by a spouse may elect to pass any of the decedent’s unused exemption to the surviving spouse. It is in this way that married couples have a unified federal taxable estate threshold of $27,980,000 in 2025.
Any gifts that exceed the annual exclusion amount will count towards this lifetime exemption.
Your Generosity Meets Your Financial Plan: How Your Gifting Matters
Reduce Lifetime Estate Taxes
The federal government taxes estates above this lifetime gift tax exemption threshold. The reality of federal estate taxes might seem distant, but if you or a family member anticipate that this could affect your planning, consider evaluating qualified and trusted professionals to tailor personalized, thoughtful, and long-term solutions.
Proactive estate planning isn’t just prudent – it’s an act of care for your legacy.
By gifting assets while you’re alive, you can reduce the total value of your estate and potentially lower your estate tax liability. Taking advantage of the annual gift tax exclusion allows you to purposefully gift more of your assets throughout your lifetime.
Strategically using your annual gift exclusion with your lifetime exemption, individuals, as well as married spouses, can transfer significant assets tax-free during their lifetime.
By embracing the opportunity to gift assets during your lifetime, you’re not just reducing your estate’s value; you’re actively shaping its transfer and guiding more of what you’ve built to reach those you cherish.
Minimize Potential Future Tax Rate Increases and/or Threshold Decreases
Like most fiscal policies – and tax rates are a component of fiscal policy – things can and do change with the political environment.
Using the full annual gift tax exclusion now means you have tax rate clarity on that portion of your assets.
The current gift tax exemption is relatively high as compared to more recent. For reference, the gift tax exemption was $5,000,000 in 2011.
For those interested in a broader historical perspective, the table below shows the individual federal taxable estate thresholds for tax years 2011 through 2025.
Expand the table below to see a recent history of the individual federal taxable estate thresholds for tax years 2011 through 2025.
| Year of Death | If your individual federal taxable estate exceeds |
|---|---|
| 2011 | $5,000,000 |
| 2012 | $5,120,000 |
| 2013 | $5,250,000 |
| 2014 | $5,340,000 |
| 2015 | $5,430,000 |
| 2016 | $5,450,000 |
| 2017 | $5,490,000 |
| 2018 | $11,180,000 |
| 2019 | $11,400,000 |
| 2020 | $11,580,000 |
| 2021 | $11,700,000 |
| 2022 | $12,060,000 |
| 2023 | $12,920,000 |
| 2024 | $13,610,000 |
| 2025 | $13,980,000 |
Source: IRS Estate Tax page
Facilitating the Earlier Enjoyment of Wealth
Gifting allows you to see the positive impact of your wealth on your loved ones now.
This can be incredibly rewarding and align with your values of generosity and support during their lifetimes. You can witness their milestones, help them overcome challenges, and experience their successes in a more direct way.
Supporting Your Charitable Causes
While not directly gifting to individuals, your overall philosophy of generosity might extend to charitable giving, which offers its own set of tax considerations and aligns your wealth with causes you believe in. This can be part of a broader gifting strategy within your financial plan.
Providing Financial Education and Mentorship
Consider pairing your gift with financial education or a meaningful experience with the recipient.
Younger, or less experienced recipients can benefit from the financial rocket fuel you’ve gifted them. They also have the benefit of time.
You could talk with them about how this meaningful gift allows them to save for a future savings priority; an emergency fund, contribute to their retirement account, or paying down student loans for example.
You could also help your loved quantitatively understand how this gift allows them to shift their spending into a savings priority.
Take it one step further. You could get even more granular and help them automate their savings. You could provide accountability by gently checking in with them to see how they are progressing toward their savings goal, seeing if they have questions, and sharing your own learning experiences.
As wonderful as giving to others can make you feel, it’s important to consider whether your own financial future has been planned and funded before embarking on these generous and tax-efficient approaches to helping loved ones and close friends.
It could mean that you adjust your retirement spending to incorporate one or several of these approaches during your lifetime. Make sure your retirement is secure, and that you’ve fully addressed your other savings priorities.
Giving others financial help can sometimes be tricky emotionally, psychologically, and logistically.
Good communication, genuine sincerity, and thoughtful planning can help overcome pride, doubts, and inaction.
Taking a Strategic View of Your Finances
We help busy parents and individual professionals like you develop financial plans to address questions like:
- How can we save for a fulfilling retirement beyond our 401(k) plans?
- What does it take to save for the kids’ education and make a lifetime of memories along the way?
- These causes are close to our hearts – what are our options to give even more meaningful support?
As your financial planner in Saint Louis, we can help you get organized and start feeling more confident that you are making progress towards your savings priorities.
Working with your financial planner can provide you with the right mix of accountability, collaboration, and long-term thinking.
When you know who and what are truly important, we can help you create incredible clarity about your spending and savings priorities. Clarity to confidently save for and spend on what matters.
If you’re ready to take the next step together, let’s talk.
Disclosure
This commentary is provided for educational and informational purposes only and should not be construed as investment, tax, or legal advice. The information contained herein has been obtained from sources deemed reliable but is not guaranteed and may become outdated or otherwise superseded without notice. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.
- IRS. Rev. Proc. 2024-40. https://www.irs.gov/pub/irs-drop/rp-24-40.pdf ↩︎