Gifting is Not as Easy as it Looks!

The U.S. tax code is notoriously complex—spanning an astounding 6,871 pages, with an additional 75,000 pages of regulations interpreting its rules. Among the many intricacies of the tax system is a surprising twist: the concept of a "gift tax." Most people think of gifts as acts of generosity, but under certain circumstances, giving too much of your money away could result in a hefty tax bill from the IRS.

As of 2025, individuals are limited to giving $19,000 per year to any one person without triggering gift tax implications. And if the value of your gifts goes over that amount, you could owe 18 - 40% on the excess amount. But don’t worry—there are plenty of strategies to maximize your giving while staying on the right side of the tax rules. In this post, we’ll break down how the gift tax works, explore its quirks, and highlight ways to navigate the system effectively.

There are a few elements to the rules: One is that you can gift up to $19,000 to as many individuals as you would like. If you have 10 grandkids and want to provide a gift to all of them, you can give away up to $190,000, $19,000 to each. If you are married, feel free to double up. Each of you can gift up to $19,000 for a total to an individual of $38,000. The other twist is that the person receiving the gift never pays tax on the gift, no matter how large!

But how can you avoid the tax? Let’s explore that here:

• If you are single and want to gift to a married couple, you can give $19,000 to each of them for a total of $38,000. If you are married, both you and your spouse can give $19,000 to each of the married couple increasing your gift possibility to $76,000.
• If you are gifting around the end of the year and you desire to give a higher amount, you could give one gift of $19,000 on December 31st and another gift of $19,000 on January 1st, effectively doubling in a different fashion.
• In lieu of gifting, another alternative is setting up a loan. You can loan money to any person you’d like and avoid the gifting rules and regulations, no matter the amount. You should document the loan, have both parties sign and stick by the repayment provisions of the loan. Amounts not paid back could be deemed to be loan forgiveness, which is viewed just like a gift.
• Beyond that, as of 2025, each of us has what is called a lifetime exemption. That exemption amount is $14 million. Separate and distinct from the $19,000 limit, each of us can gift to anyone we please an amount up to $14 million at any point in our lives. If your gifts exceed the annual $19,000 limit as outlined above, the person giving the gift will need to file a gift tax return for the year your gifts were made. You should work with a tax professional to guide you through the filing of your gift tax return.

Who knew it could be so complicated to give away your money? Small gifts are no problem and do not require any documentation, but when you exceed the limits as outlined above, things can get hairy. Before that happens, seek the help of a tax professional and a financial advisor who can work together to guide you.

Giving should be a joyful act, but the complexities of the U.S. tax code can make it feel more like a puzzle to solve. While the annual $19,000 limit on gifts might seem restrictive, there are plenty of creative strategies to ensure your generosity doesn’t come with an unwelcome tax surprise. Whether it’s leveraging lifetime exemptions, carefully timing your gifts, or structuring loans, planning ahead can help you achieve your goals without unnecessary complications.

As always, when it comes to navigating tax rules, it’s best to consult a tax professional. They can guide you through the nuances of the gift tax and help you make the most of your giving while staying compliant with IRS regulations. With the right approach, you can focus on sharing your wealth and creating meaningful impact—without worrying about the fine print.

This is for informational purposes only and should not be interpreted as specific investment advice. OneDigital and its associates do not provide tax advice. Investors should make investment decisions based on their unique investment objectives and financial situation.