This time of year naturally brings giving to the forefront, from helping family members take the next step in life to supporting causes that reflect your values.
Many people assume that any gift over the annual exclusion amount is immediately taxable. That’s simply not true. In reality, these gifts may need to be reported, but they don’t automatically trigger a tax bill. Understanding how this works can open up meaningful ways to give, invest, save, and share your values.
The Annual Gift Exclusion Isn’t a Tax Trigger
For 2025, the annual gift tax exclusion is $19,000 per recipient.
That means you can give up to $19,000 to as many people as you like this year without needing to file a gift tax return (Form 709) or reducing your lifetime exemption.
If you’re married and split gifts with your spouse, that amount effectively doubles to $38,000 per recipient.
Going Over the Limit? It’s About Reporting, Not Paying
If you give more than $19,000 to one person in 2025, you don’t automatically owe tax. You’ll just need to file Form 709, and any amount over the limit will count against your lifetime gift and estate tax exemption.
For 2025, that lifetime unified exemption is $13.99 million per person, or $27.98 million for a married couple. In other words, most people can make very large gifts without paying tax, as long as their total lifetime gifts stay below that exemption.
Superfunding 529 Plans
One of my favorite strategies for families with young children is to use a 529 college savings plan. Contributions to a 529 count as gifts for tax purposes and follow the same annual exclusion rules, so you can contribute up to $19,000 per child in 2025 without needing to file a gift tax return.
But there’s another option called the accelerated five-year gifting rule for 529 plans. It allows you to make up to five years’ worth of gifts all at once. That means one parent could contribute up to $95,000 to a 529 plan in a single year, or $190,000 for a couple, and elect to spread it evenly over five years for gift tax purposes.
This can be especially beneficial for families who want to overfund a child’s 529 plan early, allowing more years of tax-free growth, or for those living in states that offer generous 529 plan tax deductions.
Helping Kids with Home Down Payments
With the rising cost of housing, I’m seeing more parents use gifting strategies to help their adult children with a down payment on a first home. Whether that’s giving up to the $19,000 annual exclusion or dipping into your lifetime exemption for a larger gift, this can usually be done without triggering any immediate tax bill.
Charitable Giving: Deduct, Simplify, and Multiply Your Impact
For those looking to give beyond family, Donor Advised Funds (DAFs) remain a fantastic option. They allow you to receive a large charitable deduction in the year you contribute to the fund, while spreading out your actual grants to charities over several years.
This can be especially useful if your income fluctuates or if you expect a high-income year. You can “front-load” several years of giving into one contribution, take the deduction now, and then direct donations from the fund at your own pace.
The recently passed One Big Beautiful Bill also introduced new opportunities for charitable giving. Even taxpayers who don’t itemize deductions may now qualify for a small charitable deduction starting in 2026. And because the bill lifts the cap on the SALT deduction, more people are likely to itemize again, which brings charitable contributions back into play for many households.
Gifting with Purpose
As you think about your holiday season and year-end planning, here are a few takeaways to keep in mind:
- The annual gift exclusion ($19,000 per person in 2025) is a reporting threshold, not a tax barrier.
- The lifetime exemption is $13.99 million per individual and $27.98 million per married couple.
- 529 plans can be superfunded for up to five years’ worth of gifts at once.
- Helping your kids or grandkids buy a first home can be a powerful, tax-efficient way to transfer wealth.
- Donor Advised Funds and the new charitable rules under the One Big Beautiful Bill make it easier to give intentionally and strategically.
At the end of the day, giving isn’t just about saving on taxes. It’s about giving smartly, so that more of your resources reach the people and causes that align with your values, instead of sending more of it to Uncle Sam.
References:
IRS.gov — Gift Tax Exclusion and Lifetime Exemption (2025)
Kiplinger — IRS Raises 2025 Gift Tax Exclusion to $19,000
SmartAsset — 2025 Estate and Gift Tax Exemption Rises to $13.99 Million
Fidelity & Ameriprise — 529 Plan Contribution and Gift Tax Rules
Summary of One Big Beautiful Bill legislative updates (SALT cap and charitable deduction provisions)
