What's the Maximum Tax-Free Gift I Can Give to My Son and His Wife?

Eric Reed

Mon, Jan 6, 2025, 6:30 AM 10 min read

Let’s say that you’re an individual who wants to give money to two people, your son and his wife. Maybe this is to help with a wedding, down payment for a home or building a family.

You can likely give away a good amount of money without incurring any taxes, but there may be some other hoops to jump through. In 2025, you can give away up to $19,000 to each recipient without needing to report it to the IRS. Then, you can give away another $13.61 million total tax-free throughout your lifetime, although you will need to report such transfers. In 2025, you could theoretically give your son and daughter-in-law up to a combined $13,648,000 tax free. If you’re married, you can likely give even more. It’s a little more complicated than that though, so read on to learn just how the gift tax works.

Consider consulting a financial advisor who can help you build a strategy to most effectively give gifts to family.

What Is the Gift Tax?

The gift tax is a hybrid tax on gifts and other transfers. It partially overlaps with the estate tax, which is where the “hybrid” part comes in.

The IRS defines a gift as “the transfer of property by one individual to another while receiving nothing, or less than full value, in return.” Basically, you trigger this tax when you give someone property or assets without receiving equivalent value in return. Equivalent value (or “full value”) is a reasonability test. You don’t have to prove your transaction to a market certainty, just that a reasonable person could see this as a fair trade.

The gift tax only applies to exchanges of ownership. Personal services don’t apply, nor does letting someone borrow or access your property. For example, say you’re a CPA. Doing your friend’s taxes is not a transfer, nor is letting them stay at your beach house for a week, even though both have market value. You must give them ownership of actual assets.

The gift tax is most often triggered by three situations:

Unilateral transfers, in which you give assets while receiving nothing in return.
Low-value transfers, in which you give assets while receiving less than full value in return.
Low- or no-interest loans, in which you give a loan and charge significantly less than market interest.

Lawyers use the 19th century example of a “peppercorn promise” to illustrate low-value transfers. Say your friend offers to sell you their car in exchange for a peppercorn. This would be a gift dressed up as a sale because, even though you are technically exchanging assets, the value of the car dramatically exceeds 1/16 teaspoon of spices. The taxable value of this gift would be the difference in value between the car and the peppercorn.

Finally, the IRS exempts several categories of transfers from the gift tax. For example, direct tuition and medical payments typically do not count as taxable gifts regardless of the amount.

For help navigating the complications of gift tax laws, consider consulting with a fiduciary financial advisor.

Gift Tax Exclusions and Rates

Like the estate tax, few households will ever pay the gift tax. This is due to high annual and lifetime exclusions, which are amounts that you can give away without triggering gift taxes.

Annual Exclusions

The annual exclusion is the amount you can give away each year without reporting it to the IRS. The annual exclusion operates on a per-donor, per-recipient basis. This means that you can give away up to the annual exclusion to an unlimited number of people each year without reporting it. In 2025, the annual exclusion is $19,000, and the IRS generally adjusts it each year for inflation.

The annual exclusion renews each year, meaning that the amount you can give tax-free in a given year has no relationship with gifts you have made in previous years.

For example, in 2025, you could give $19,000 to your son and another $19,000 to your daughter-in-law without reporting these transfers to the IRS or paying taxes. Then, in 2026, you can do so again.

The annual exclusion has no relationship with the estate tax.

Lifetime Exclusions

Once you exceed the annual exclusion to a given recipient, you must report any additional gifts to the IRS using Form 709. This form is filed with your annual taxes, not at the time you make the gift.

Gifts in excess of the annual exclusion apply to your lifetime exclusion. This is the amount that you can transfer tax-free over your entire life, in both gifts and estate. It applies cumulatively to you, personally, regardless of recipients. In 2025 the lifetime exclusion is $13.61 million.

The lifetime exclusion does not renew annually. While the IRS does raise the cap each year to account for inflation, each transfer you make reduces your lifetime exclusion permanently.

For example, say that you give $22,000 to your son and $25,000 to his wife. Together, this is a combined $9,000 in gifts above the annual exclusions ($3,000 to your son and $6,000 to your wife). You would report that $9,000 in gifts on Form 709 to the IRS and your lifetime exclusion would be reduced by $9,000, potentially from $13.61 million to $13,601,000. That reduction will not go away, even if the IRS raises the exclusion for inflation.

The lifetime exclusion is a shared exclusion for gifts and estates. During your lifetime, you can make any amount of gifts tax-free to the amount you have remaining in your lifetime exclusion. Then, in your estate, you can pass assets to your heirs tax-free again to the amount you have remaining in your lifetime exclusion.

Gift Tax Rates Above the Exclusion Amounts

If you make a gift that exceeds both your annual exclusion to that individual and your remaining lifetime exclusion, you will owe taxes on the remainder. Gifts and estates are taxed at between 18% and 40% depending on the amount in question.

For example, say that in 2025 you have $110,000 left on your lifetime exclusion. This means that, over the course of your life, you have given away $13.5 million above each year’s annual exclusion to various individuals and organizations. You now want to give $100,000 each to your son and daughter in law. Your taxes would work like this:

Son Annual Exclusion: $100,000 – $19,000 = $81,000
Daughter-in-law Annual Exclusion: $100,000 – $19,000 = $81,000
2025 Reportable Gifts: $81,000 * 2 = $164,000
Lifetime Exclusion: $110,000 – $164,000 = -$54,000
Taxable Gift: $54,000

You do not report gifts up to the annual exclusion for each recipient ($19,000 in 2025). Then you can reduce any reportable gifts by the amount left in your lifetime exclusion. Since your reportable gift exceeds your lifetime exclusion, you will owe taxes on the remaining $54,000.

Only the giver must report and pay the gift tax. Gifts are generally not considered taxable income, and the recipient does not have to pay gift taxes.

A financial advisor can help you build an appropriate gifting and estate plan. Talk to a financial advisor today.

How Much Can You Give Away?

So, all of this said, how much can you give away to your son and his wife? The answer depends in part on how much giving you’ve made during your life to this point. If you have made past gifts above your annual exclusion for a recipient, then your lifetime exclusion will be reduced by that amount. However, assuming that you still have your full lifetime exclusion, the most you can give your son and daughter-in-law tax free, assuming you are single, is:

Son Annual Exclusion: $19,000
Daughter-in-law Annual Exclusion: $19,000
Lifetime Exclusion: $13.61 million
Total 2025 Giving: $13,648,000

You can give them the total value of your annual exclusion per person, plus the total lifetime exclusion, for a total tax-free gift of $13,648,000. Although note that, if you do so, you will use up your entire lifetime exclusion. Future transfers through gifts and your estate may be taxed.

Double Your Gift With Gift Splitting

Finally, there is gift-splitting. This refers to the fact that each member of a married couple receives their own annual and lifetime exclusions, even if they file taxes jointly. So, say that you’re married. You can give your son and his wife up to $19,000 each in 2025 under the annual exclusion. Your spouse could also give your son and his wife up to $19,000 each under her own annual exclusion, for a combined gift of $76,000 from one household to the other.

If you gift-split you must file form 709. This lets you tell the IRS how you have distributed the gift among the members of your household. For example, say that you give your son $30,000. You would need to file a form 709 so that you and your spouse can each claim $15,000 toward your annual exclusion.

Gift-splitting also applies to lifetime exclusions. If you are married, in 2025, your household has $13.61 million per spouse to transfer tax-free for combined maximum giving of $27.22 million. Once you exceed your annual exclusion, you can then distribute gifts between your and your spouse’s lifetime exclusions. So, if you are married and would like to give money to your son and his wife, you could theoretically give them up to $27,296,000 in 2025 tax-free.

Gift splitting can get complicated. Consider consulting a financial advisor who can help you navigate the rules.

The Bottom Line

Gift taxes apply to any unilateral transfer or any exchange when you give assets for less than their full value. Each year the IRS allows you to give an amount tax-free to any number of recipients, and over your lifetime you can give away more than $13 million without paying any taxes on it either.

More Resources

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