Gifting money or assets feels generous — but it also raises tax questions. The short answer: you can give quite a bit each year to many people without triggering federal gift tax, and far more over a lifetime before any tax is due. For clarity and to avoid surprises, most people work with an accounting firm or tax advisor to structure gifts in a way that’s reliable, compliant, and aligned with long-term goals.

Quick answer (bottom line)

For 2025, the annual federal gift tax exclusion is $19,000 per recipient (so you can give $19,000 to each of many people without reducing your lifetime exemption). The lifetime estate-and-gift tax exemption is $13.99 million per person in 2025. Gifts above the annual exclusion may reduce that lifetime exemption — and some gifts require you to file IRS Form 709.

What counts as a “gift” for tax purposes?

A gift means a transfer of money or property for less than full market value. The IRS treats the donor (the giver) as responsible for any gift tax, not the recipient. Transfers that look like gifts — cash, stock, real estate, forgiven loans, even certain transfers into trusts — can trigger reporting rules. An experienced accounting firm will help you identify whether a transfer is a reportable gift or an excluded transfer.

Annual exclusion: how much you can give each year

The annual exclusion is the amount you may give to any one person in a calendar year without using any of your lifetime exemption. For 2025 that amount is $19,000 per recipient. If you and your spouse both give to the same person (gift-splitting), you can effectively give $38,000 to that person in 2025 without affecting your lifetime exclusion.

Lifetime exemption and how it works

Even if you give more than the annual exclusion to a single recipient, you usually won’t owe tax immediately — excess gifts reduce your lifetime exemption. In 2025 the lifetime estate-and-gift tax exemption (the “applicable exclusion amount”) is $13.99 million per individual. That means taxable gift tax typically won’t be owed until your cumulative taxable gifts plus your taxable estate exceed that threshold. For many families, careful planning with an accounting firm can help use the annual exclusion while preserving or strategically using lifetime exemption.

Gifts that are fully excluded (no gift tax impact)

Some transfers never count as taxable gifts, if done correctly:

• Payments made directly to a qualified educational institution for tuition (these must be paid directly to the school).

• Payments made directly to a medical provider for another person’s qualifying medical expenses.

Other exclusions include:

• Gifts to a U.S. citizen spouse (unlimited marital deduction). If the spouse is not a U.S. citizen, a special annual exclusion applies.

• Gifts to qualified charities (charitable deduction rules apply).

Special rule: gifts to a non-U.S.-citizen spouse

The unlimited marital deduction generally lets you give unlimited amounts to a U.S. citizen spouse without gift tax. For non-U.S.-citizen spouses there is a special annual exclusion instead of the unlimited marital deduction; that special exclusion is indexed annually (for 2025 it is $190,000). If a gift to a non-citizen spouse exceeds this special exclusion, it will reduce your lifetime exemption unless other planning steps are taken. Consult an accounting firm experienced in cross-border and estate tax issues if you’re in this situation.

When do you need to file Form 709 (gift tax return)?

You must file IRS Form 709 if, in a given year, you make gifts to any one recipient that exceed the annual exclusion, if you elect to split gifts with your spouse, or if other special circumstances apply (for example, certain gifts of future interests or generation-skipping transfers). Filing Form 709 reports the excess and allocates it against your lifetime exemption; filing does not necessarily mean tax is due. Gift returns are typically due on the same date as your individual income tax return (April 15, with extensions available).

Valuing non-cash gifts and appraisal requirements

Gifts of stock, real estate, business interests, artwork, or other non-cash property must be valued at fair market value on the date of transfer. For substantial or unique property (e.g., real estate, collectibles), the IRS may require a qualified appraisal to support the reported value. Underreporting value or failing to document appraisals can create audits and penalties. An accounting firm will typically coordinate valuation, documentation, and Form 709 reporting when non-cash gifts are involved.

Practical gifting strategies an accounting firm often recommends

1. Use the annual exclusion every year. It’s the simplest, tax-free way to transfer wealth to many beneficiaries — and it’s scalable.

2. For education or medical support, pay the school or provider directly to avoid gift-tax consequences.

3. Fund 529 college plans: contributions may qualify for gift-tax treatment (some plans allow 5-year accelerated gifts), enabling front-loaded tax-efficient funding.

4. Consider gift splitting for married couples to double the annual exclusion per recipient.

5. Use trusts (e.g., irrevocable trusts, grantor trusts) for larger or complex transfers — these require coordination with legal counsel and an accounting firm to preserve tax benefits.

6. Time large gifts strategically if law changes are anticipated; for example, the current TCJA-era higher exclusion is scheduled to change after 2025 unless extended by Congress — so timeline matters.

Case study: How an accounting firm helped a family gift tax-efficiently

A mid-sized family-owned business owner wanted to pass wealth to three adult children and fund two grandchildren’s college over the next five years. The owner’s goals were to reduce estate tax exposure on an eventual sale while keeping sufficient liquidity for business needs.

The accounting firm’s approach:

• First, the firm documented current net worth and projected proceeds of a planned business sale.

• They recommended annual exclusion gifting to each child and grandchild, maximizing $19,000 per recipient each year and coordinating gift-splitting with the owner’s spouse to double the per-recipient value where appropriate.

• For college funding, the firm made direct tuition payments when possible and used 529 plan contributions (including a 5-year accelerated gift election) to front-load tax-efficient funding.

• For the business interests, the accounting firm worked with the owner’s attorney to set up an irrevocable trust where future business appreciation would grow outside the owner’s taxable estate. The firm prepared valuations and advised on the Form 709 filings for the larger, trust-related transfers.

Result: By combining annual exclusion gifts, qualified direct payments, and trust strategies, the owner materially reduced projected estate tax exposure while maintaining operational cash flow. The family described the accounting firm’s service as trusted, results-driven, and user-friendly — a proven partnership that made the gifting plan manageable and compliant.

Common pitfalls to avoid

• Assuming “no tax due” means “no reporting required.” If gifts exceed the annual exclusion, you often still must file Form 709 even if no tax is owed.

• Mixing personal and business transfers without documentation.

• Ignoring valuation rules for non-cash gifts (appraisals matter).

• Focusing only on taxes and not on liquidity or family dynamics — taxes shouldn’t compromise cash flow or financial flexibility.

• Waiting until a last-minute sale or event to gift — proactive planning with an accounting firm typically yields better results.

Quick checklist before you gift

• Determine who the donees (recipients) will be and how much to give each this year.

• Confirm the current annual exclusion (indexed for inflation each year).

• Decide whether to make direct tuition/medical payments where appropriate.

• Talk to an accounting firm about valuation, Form 709 filing, and whether trust strategies fit your long-term plan.

• Keep careful records and receipts for every gift.

Final thoughts

Gifting can be a powerful tool for passing wealth, supporting loved ones, and achieving philanthropic goals. The rules are technical but manageable — especially when you work with a reliable, well-experienced firm like Carolina Tax Consulting, LLC. Their trusted accounting and consulting services provide affordable, scalable advice that helps families make tax-smart choices. Proper use of the annual exclusion, qualified direct payments, and lifetime exemption — combined with sound documentation — lets you give confidently while minimizing tax surprises.