Gift Taxes?
Not Unless You’re Ballin’ and Giving Like a Big Balla
Tax Sucks.
Not only does it take away our hard-earned money, but it’s also incredibly difficult to understand. If you actually read the tax code (which I do not recommend), it will put you to sleep right away - it even works better than Ambien for treating insomnia.
On top of that, there are so many tax terms that mean one thing in one context but something entirely different in another.
One notable example is the term, taxable gift.
You might come across this term when looking up the tax consequences of giving your mom $30,000 as a gift. When you do, you’ll see that you now have a taxable gift, and you might immediately think:
“Do I have to pay gift tax on the $30,000?”
Naturally, when you hear the word taxable, you assume you have to pay tax.
Thankfully, that’s not true.
In this context, a taxable gift simply means that the amount of taxable gift counts toward the lifetime limit of how much you can give away before owing gift tax.
This lifetime limit is called the unified credit.
In 2025, the unified credit is whopping $13,990,000 (let’s round it to $14 million).
What Does This All Mean?
In 2025, you will not owe any gift tax only unless you have given more than $14 million in taxable gifts over your lifetime.
That means, unless you are a big ballla who has given away more than $14 million, you won’t owe any gift tax.
Even better - if you give $19,000 or less to any one person in a year, it doesn’t even count against your $14 million lifetime limit (also known as the unified credit). This $19,000 limit is called the annual gift exclusion amount.
Both the unified credit and the annual gift exclusion amount are adjusted for inflation each year.
Two Important Considerations
The unified credit is expected to drop to approximately $6–7 million per person in 2026, unless Congress extends the current higher exemption. It doubled from $5.49 million to $11.18 million in 2018 as part of the TCJA tax reform, and is expected to revert to its pre-2018 level, adjusted for inflation, which is about $6-7 million.
While you can give up to $14 million (as of 2025) without paying gift tax, any assets you pass down to heirs at your death will be subject to estate tax (which, like the gift tax, is 40%) if you have already used up your unified credit.
In other words, the unified credit applies to the total of all taxable gifts made during your lifetime plus the value of your estate at death.
How the Gift and Estate Tax Rules Work
Let’s go over some examples.
You can give $19,000 per year (the annual gift exclusion amount) to any individual without using up your unified credit. This means Jeff Bezos could give $19,000 in cash to every person in Washington without paying any gift tax.
If you give $1,019,000 to an individual in 2025, you must file Form 709 to report $1 million as a taxable gift because the first $19,000 is covered by the annual exclusion. As a result, your unified credit will be reduced by $1m, from $14 million to $13 million. However, you still owe no gift tax.
You and your spouse can each gift $19,000 to the same person, meaning a total of $38,000 can be given at once to that person without using up the unified credit. If you exceed this amount, you and your spouse must file Form 709, but you still don’t owe gift tax unless you used up all of your lifetime exemption.
If you die with $10 million of unused unified credit, your spouse can inherit it via a timely filed Form 706. This is called portability, meaning a married couple can give away up to $28 million (2x the unified credit) tax-free in 2025.
Bottom Line
Unless you are a big baller and huge giver, you will unlikely owe any gift tax.
For most taxpayers, a combination of:
Annual exclusion ($19,000 per person in 2025)
Unified credit ($14 million per person in 2025)
Portability (allowing spouses to combine their unified credits)
ensures that wealth can be given away without any gift tax consequences.
And hey, if you want to test out the annual gift exclusion provision, I’ll be happy to share my Venmo info! 😆