Holidays are the perfect time to show generosity towards your loved ones, but smart planning can ensure that your gifts do not come with unexpected tax consequences. The IRS has specific rules around how much you can give each year before gift tax reporting is required, and certain types of gifts do not count toward those limits at all. Here is a simple guide to make your holiday gifts tax smart.
- Know the 2025 Gift Tax Exclusion
You can give up to $18,000 per person without triggering gift tax reporting or reducing your lifetime gift and estate tax exemption. This limit applies per recipient — meaning you can give $18,000 to each of your children, grandchildren, or friends, and your spouse can do the same, effectively doubling the gift to $36,000 per recipient for married couples. - What Happens If You Give More?
Giving more than $18,000 to a single person in 2025 requires filing IRS Form 709 (gift tax return), and the excess counts against your lifetime gift and estate exemption ($13.99 million per individual in 2025, indexed for inflation). Most people won’t owe gift tax unless their lifetime gifts exceed this limit. - Tax-Free Gifts That Don’t Count
Some gifts are exempt from the $18,000 limit and do not require reporting:- Tuition Payments made directly to the educational institution.
- Medical Expenses paid directly to a healthcare provider.
- Gifts to Spouses
- Gifting Non-Cash Assets
You can give stocks, mutual funds, or other assets instead of cash. The gift is valued at its fair market value on the date of the gift, and the recipient generally assumes your cost basis, which may have future capital gains tax implications for them when they sell.
Bottom Line
Holiday generosity can be deeply rewarding, and with an understanding of the IRS gift rules, you can give freely without creating unintended tax issues. Whether you are making cash gifts, paying for a grandchild’s tuition, or transferring appreciated stock, thoughtful planning ensures your generosity has maximum impact for the people you care about.