You may desire to give money to family members for various reasons. The assets you develop for your children will offer them a significant financial edge in the future. Gifting money to family members might be a pleasant surprise on their birthdays or during the holidays. The gift of money might even help your family members make ends meet during difficult financial circumstances.
However, parents must examine more than just the tax effects of giving money to family before writing a check or forming a trust.
In most cases, a person receiving a gift from their family does not have to pay gift tax. At the federal level, gifts are not taxable income for the recipient. However, there are limitations to how much you can give without reporting requirements or potential tax implications for the giver.
A gift tax is a federal tax imposed on individuals who transfer money or property to others without receiving full value in return. Because of the annual exclusion, many gifts fall under the IRS’s tax-free threshold, meaning most small to moderate financial gifts between family members have no tax consequences.
In 2025 and 2026, the IRS allows individuals to give up to $19,000 per recipient each year without needing to file a gift tax return. This is known as the annual gift tax exclusion, and it applies on a per-recipient basis. For example, you can gift $19,000 to your mother, $19,000 to your brother, and $19,000 to a friend in the same year without filing IRS Form 709. If you are married, you and your spouse can combine your exclusions and jointly give up to $38,000 per recipient annually without any reporting requirements.
However, if the value of a gift to a single individual exceeds the annual limit, the giver must file IRS Form 709 to report it. This doesn’t necessarily mean gift tax will be owed. The excess simply counts toward your lifetime gift and estate tax exemption, which is $13.99 million as of 2025 (subject to inflation adjustments in 2026). In most cases, the giver is responsible for any gift tax owed. However, arrangements can be made for the recipient to pay the tax instead, though this requires special consent and planning.
It’s important to remember that while gifts are not taxable, any future income generated from those assets—such as interest, dividends, or rent—is considered taxable and must be reported. For example, if you’re gifted stocks that pay dividends, you’ll owe tax on those dividends, even though the original gift was tax-free.
Also, keep in mind:
As with any tax matter, especially when large sums or complex assets are involved, it’s wise to consult a qualified tax advisor. The rules around gifting can be nuanced, and professional guidance can help you avoid mistakes and make the most of current IRS allowances.
The gift tax is a levy on significant gifts that prevents substantial wealth transfers from occurring without being taxed. It is not an income tax, but rather a transfer tax.
For example, a single individual who donates several $15,000-or-less gifts to separate recipients for a year will not be subject to the tax on gifts to family and will not be required to submit a gift tax return. Furthermore, because the number of persons who can contribute more than this amount is restricted, only a small percentage of people must decide whether they need to submit a gift tax return.
However, it is crucial to learn what constitutes a gift. If you sell a residence for much less than the IRS considers its "fair market value," the difference is deemed a gift.
Lifetime gifts also apply to your estate tax exemption. This means that any gifts exceeding the annual exclusion amount may reduce the tax-free amount you can transfer through your estate in the future. Currently, the IRS permits you to donate up to $13.99 million without paying gift tax during your lifetime, so most taxpayers will never have to pay gift tax.
So, let's assume you give your child $65,000 in 2025. This donation exceeds the yearly gift exclusion by $50,000. That implies you'll have to file a tax return with the IRS. Gifts to children and friends won’t be taxed right away. The IRS instead deducts $50,000 from your lifetime gift tax exemption. If you're unsure whether your gift to a family member is tax-free, consulting IRS guidelines or seeking expert advice from a financial advisor can clarify your obligations.
Gifting money to children can be a meaningful way to support them through important life moments, from education to starting their careers to building long-term financial stability. Before you move forward, it helps to understand how different approaches to gifting money to family members work and how they may affect your financial goals. By taking a thoughtful approach, you can provide meaningful support while protecting your own long-term well-being.
Parents can give their adult children money in a variety of ways:
When considering making a gift to a family member, tax considerations need to be made. A detailed look at your current financial situation is often the best place to start when deciding whether and how to go about giving money to children.
An increasingly common trend of parents helping their adult offspring has evolved in our society. It might involve paying for mobile phone bills, higher education expenditures, first-time home down payments, and wedding expenses. Gifting money to family is a generous way to support them during significant life milestones. However, full consideration should be given to how such gifts might affect the parents’ financial security. While giving money to family is customary, it might jeopardize your retirement plans, especially if an unforeseen emergency or medical expenses arise.
Before you decide how much to give or which approach to take, it’s helpful to think through the financial, emotional, and relational factors involved. A gift can be incredibly meaningful, but it should align with your budget, long-term goals, and the needs of the recipient. These questions can help you make a thoughtful and confident decision about gifting to children or other loved ones.
Understanding why you’re giving the gift helps you make the right financial choices. Some gifts support major expenses like education, housing, or unexpected medical expenses, while others simply celebrate a milestone. When you’re clear on the purpose, you can determine whether a one-time monetary gift is appropriate or if another form of support may be better. Clear intentions also make it easier to navigate gift tax purposes, communicate expectations, and avoid misunderstandings.
Financial help can be valuable, but it isn’t the only way to offer support. In some cases, connecting your loved one with a financial advisor or helping them explore structured financial tools, like a donor-advised fund, qualified tuition program, or direct payments that qualify as tax-free, may offer longer-term benefits. It’s also helpful to consider whether the gift encourages financial independence or creates unintended pressure. Taking time to talk openly about their needs and goals ensures that your gift supports them in a healthy, sustainable way.
Determining the right amount begins with reviewing your own financial picture. Your retirement savings, emergency funds, and future goals should remain protected before you give. From there, you can decide how much aligns with your comfort level and the recipient’s needs. Keep in mind that the IRS offers an annual gift exclusion, and gifts that exceed this limit may require filing a federal gift tax return. In those cases, any excess counts toward your lifetime gift tax exclusion and overall lifetime exemption amount. Understanding how the Internal Revenue Code defines a taxable gift can help you choose an amount that fits your situation while minimizing potential tax liability.
Money can influence family dynamics, especially if expectations aren’t clear. A thoughtful gift may strengthen your relationship, but it can also create assumptions about future support. Discussing boundaries and intentions upfront helps maintain healthy communication. For married couples, gift splitting can be an effective strategy when navigating U.S. gift rules and the revenue manager role you play in your own household finances. Taking a mindful approach can ensure your gift strengthens your connection rather than creating discomfort.
If you still have questions about gifting money to family members, you should speak with a tax professional.
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