What Gifts Are Not Subject to the Gift Tax?

Annual Exclusion Gifts, Educational Payments, and Medical Payments

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Not all transfers of property or monetary gifts are subject to the federal gift tax. You can give as much as you want to your spouse without having to pay the gift tax, barring a few exceptions. Four other types of money or property transfers that aren't considered gifts for federal gift tax purposes include:

  • Annual exclusion gifts
  • Payments for some educational expenses
  • Payments for medical expenses
  • Gifts made to certain political organizations

Key Takeaways

  • Not all gifts—monetary or property—are subject to the federal gift tax.
  • There are annual exclusion limits that allow you to give up to a certain amount without being taxed.
  • Other gifts that are generally excluded from the federal gift tax include gifts to spouses, payments for medical expenses, payments for educational expenses, and gifts made to political organizations.

What Counts as a Gift?

The Internal Revenue Code (IRC) considers a gift to be any property that's transferred to a non-spouse beneficiary with no cash or other monetary value received in exchange and when no exclusion applies.

Annual Exclusion for Gift Taxes

The annual exclusion for gifts is the amount up to which you can give someone before paying any federal taxes. The amount changes every so often. For tax year 2022, it's $16,000 per person, and for tax year 2023, it's $17,000. Under the IRC, a transfer is not a taxable gift if the value of the property transferred is below the annual amount.

This annual exclusion is indexed for inflation, so it can increase on an annual basis. But it must increase in $1,000 increments, so it sometimes sits at the same amount for a year or more before it bumps upward.

Gifts Made to Spouses

Gifts between spouses are covered by the "unlimited marital deduction." This rule states that you can give everything you own to your spouse, either during your lifetime or at your death, without incurring gift or estate tax on the value of that property.


Spouses include those of the same sex as long as they're legally married but not registered domestic partners or civil union partners.

Gifts made to a spouse who isn't a U.S. citizen are treated differently. These gifts have their own annual exclusion amount. For tax year 2022, the amount is $164.000. For tax year 2023, it's $175,000.

Gifts Made Together by Spouses

Married couples can combine their annual exclusions and gift double the annual exclusion amount or less to an individual per year without incurring any gift tax liability. So for 2022, that's $32,000 and for 2023, that's $34,000.

Couples still have to file a federal gift tax return using IRS Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return, to report these "split gifts," even if they limit their gift to double the annual exclusion amount.


A gift tax return is due on or around April 15 of the year following the tax year in which the gift was made. Consult with a tax professional to find out whether you must file if you and your spouse have given any sizable gifts to the same beneficiary during the tax year.

Educational Expenses and Gift Taxes

Payments made directly to a qualifying domestic or foreign learning institution for the education of an individual qualify for the educational exclusion under Section 170(b)(1)(A)(ii) of the IRC.

You can pay your child's or grandchild's college tuition in the amount of $20,000 and give them an additional $16,000 in the same year without incurring any federal gift tax.

A few rules apply:

  1. The payment must be made directly to the institution, not to the individual receiving the education.
  2. The payment must be for tuition only. Other expenses, such as supplies and room and board, don't count.
  3. The school must offer a regular curriculum and faculty and have a regular body of students.


The school does not have to be post-secondary. Elementary schools and high schools count if they meet all other rules.

Medical Expenses and Gift Taxes

Payments that qualify for the medical exclusion include those made directly to a medical institution or care provider for the benefit of an individual. You can also make the payment to a company that provides medical insurance to that person.

Expenses that qualify are the same as those that are deductible for income tax purposes.

You can pay for your grandchild's emergency appendectomy in the amount of $20,000 and also give them an additional $16,000 in the same year without incurring any federal gift tax.


You can also pay for transportation and lodging associated with your beneficiary receiving medical care, but certain rules apply, so speak with a tax professional.

Again, the payment must be made directly to the care provider, the institution providing the medical care, or the company providing the medical insurance.

You can't give the money to the individual receiving the medical care or the insurance benefit, or the payment will be considered a taxable gift if it exceeds the annual exclusion amount.

Gifts to Political Organizations

These are covered under Section 527(e)(1) of the Internal Revenue Code. Your gift must be used for the benefit of the organization, not passed on to anyone else.

You can give to a few tax-exempt organizations as well as others detailed under Section 501 of the tax code. These can include civic leagues, horticultural and agricultural organizations, and labor organizations, but not labor unions. The organization must be classified as tax-exempt under federal law.

Filing a Gift Tax Return

Gift tax returns are due simultaneously with your regular tax return, Form 1040. You do not have to file one if your gift meets any of the exclusionary rules above, but you must do so otherwise, even if your gift goes over the annual exclusion amount by only $10.

You may not need to file a gift tax or pay gift taxes just yet, even if you do file Form 709. That's because there is a lifetime limit that says you can give up to a certain amount to reduce your estate value when you die. For tax year 2022, the amount is $12.06 million. For 2023, it's $12.92 million. If during your year of death your estate is valued above that amount, then you'll need to file an estate tax return and pay taxes on the estate.

Frequently Asked Questions (FAQs)

How much can you gift tax free?

You can gift up to an annual exclusion amount (worth thousands of dollars) without paying any federal gift taxes. Anything over that annual amount will count toward your lifetime exemption.

How much is the gift tax?

The federal gift tax rate ranges from 18% to 40%, depending on the value of the taxable gift.

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  2. IRS. “IRS Provides Tax Inflation Adjustments for Tax Year 2023.”

  3. United States Code. "26 USC §2503."

  4. IRS. "SOI Tax Stats - Gift Tax Study Terms and Concepts."

  5. IRS. "Frequently Asked Questions on Gift Taxes for Nonresidents not Citizens of the United States."

  6. IRS. "About Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return."

  7. IRS. "What's New - Estate and Gift Tax."

  8. Legal Information Institute. "26 CFR § 1.170A-9 - Definition of Section 170(b)(1)(A) Organization."

  9. IRS. "Estate Tax."

  10. IRS. "Instructions for Form 709."

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