From weddings and graduations to helping family members put down roots or kick‑start a business, financial gifts can be a powerful way to live your values. Below is a summary of the key take‑aways—along with additional context on federal gift and estate rules—to help you give generously and wisely.
Know the Limits: Annual vs. Lifetime Exclusion
The federal government treats most gifts as taxable transfers. To simplify reporting and encourage moderate giving, however, the law provides two levels of relief:
- Annual gift tax exclusion – $19,000 per recipient (2025): The IRS allows each person to give up to $19,000 per recipient in 2025 without having to file a gift tax return . Married couples can effectively double this amount by “splitting” gifts, meaning a couple could give a child or parent up to $38,000 without tapping into their lifetime exemption . Because the exclusion applies per recipient, multiple $19,000 gifts to different people in the same year are still tax free.
- Lifetime gift and estate tax exemption – $13.99 million per person (2025): In addition to the annual exclusion, each individual receives a lifetime exemption of $13.99 million (or $27.98 million for married couples) against the combined gift and estate tax . Gifts that exceed the annual exclusion simply reduce this lifetime bucket.
Types of gifts that are automatically exempt
Not every transfer counts toward the annual or lifetime limits. The IRS does not consider the following transfers to be taxable gifts:
- Payments directly to educational institutions for tuition,
- Payments directly to healthcare providers for medical expenses,
- Gifts to a spouse, and
- Gifts to political organizations.
These exceptions can be powerful planning tools. For example, paying a grandchild’s tuition directly to their college may preserve your annual exclusion while providing meaningful support.
Making the Most of Your Gifting
Coordinate with your spouse
If you’re married, you and your spouse can each use your $19,000 exclusion. Gift splitting allows a couple to give $38,000 per recipient in 2025 . If the recipient is also married, the potential gift can jump to $76,000 ($19,000 from each donor to each spouse). Be sure to file Form 709 if you and your spouse agree to treat gifts as coming equally from both of you.
Understand the pros and cons of gifting appreciated assets
Gifts aren’t limited to cash. Transferring stock, real estate or other investments may reduce future estate taxes and let loved ones share in future growth. Keep in mind:
- Carry over cost basis – When you gift an appreciated asset, the recipient inherits your original purchase price. If they later sell, they pay capital gains tax on the appreciation . This can be advantageous if your heir is in a lower tax bracket but may reduce the benefit if they expect to sell soon.
- Lifetime exemption usage – Transferring highly appreciated assets can help remove future appreciation from your estate. Strategies like grantor retained annuity trusts (GRATs) or upstream gifts to older family members may further reduce estate taxes . These techniques are complex, so coordinate with an estate attorney or tax professional.
- Charitable giving – Donating appreciated securities directly to charity can eliminate capital gains taxes and yield a deduction for the full fair market value . Vehicles like donor advised funds or charitable remainder trusts can simplify the process and support long term philanthropic goals .
Plan 529 contributions carefully
Contributions to 529 college savings plans are considered completed gifts. In 2025 you can contribute up to $19,000 per beneficiary ($38,000 per couple) without filing a gift return. A special five year “superfunding” election lets you contribute up to five times the annual exclusion at once—$95,000 per person or $190,000 per couple—and treat it as if made evenly over five years. This approach can jump start college savings but uses future annual exclusions, so avoid making additional gifts to that beneficiary during the five year period or be prepared to file Form 709.
Financial aid considerations: Historically, withdrawals from grandparent owned 529 plans were counted as student income on the FAFSA, potentially reducing aid. However, the simplified FAFSA for the 2024–25 school year and beyond no longer includes these distributions in the aid calculation. Parents should still consult college financial aid offices to understand how gifts or account ownership might affect institutional aid policies.
Mind the timing for major life events
If you’re helping with a down payment or a wedding, document your gift properly. Lenders often require a gift letter stating that the funds do not need to be repaid. Making the gift several months before applying for a mortgage can help avoid delays. Also note that large gifts may reduce eligibility for need based college aid if they increase the student’s assets; in that case, consider waiting until after January 1 of the student’s sophomore year (when fewer annual income years are considered).
Align Giving With Your Values
Gifting is about more than avoiding taxes—it’s a way to express your values and support the people and causes that matter most. Before making a large gift, consider how it fits into your broader financial plan:
- Can you afford the gift without jeopardizing your own retirement?
- Would gifting now support your loved ones more than leaving a larger estate later?
- Do you want to attach conditions or expectations to the gift (for example, using a trust to ensure responsible use)?
A thoughtful strategy can help you balance generosity with security.
We’re Here to Help
The laws around gifting, estate taxes and college planning are complex and frequently changing. While this overview provides general information, every family’s situation is unique. At North Texas Wealth Management, we specialize in aligning your financial plan with your core values. Whether you’re considering a one‑time gift, establishing a trust or integrating gifting into a comprehensive estate strategy, our advisors can help you evaluate options, manage taxes and plan with confidence.
Ready to explore how gifting fits into your journey? Contact us today to schedule a complimentary Discovery Meeting and start giving with purpose.
This material is for general informational purposes and is not intended as specific tax or legal advice. Before acting on any information here, consult your attorney or tax professional to address your individual circumstances. 814183
