How to Gift $1M Without the IRS Calling

The Internal Revenue Service (IRS) has its hand out for tax dollars associated with your generosity, but there are tax-smart loopholes. In fact, the IRS will even let you give away $1 million without sending you a bill. You can gift $19,000 per person per year as of 2025 or $13.99 million throughout your lifetime if you should pass in this year.

What Is a Taxable Gift?

The IRS potentially applies the federal gift tax to “the transfer of property by one individual to another while receiving nothing, or less than full value, in return.” It adds this caution: “The tax applies whether or not the donor intends the transfer to be a gift.”

This includes future interests in property. The recipient won’t own or derive income from this type of gift until some date in the future.

“A ‘gift’ is any transfer of funds, property, or assets for which the receiver doesn’t give an equivalent fair market value in exchange,” according to William “Bill” London, an estate planning attorney with Kimura, London & White LLP in California and New York. “This includes cash gifts, loan forgiveness, or the sale of property at a price less than its true value. Interest-free loans can also be classified as gifts under IRS rules.”

How the Gift Tax Works

The federal gift tax is payable by the donor of a gift, not the recipient, and a portion of the value of all gifts is exempt.

The exclusion is $19,000 per person per year as of 2025. The amount is adjusted annually to keep pace with inflation. It was $18,000 in 2024. These amounts can double when spouses make gifts to the same individual because each spouse is entitled to claim that $19,000 exemption. The recipient can therefore receive $38,000 tax-free.

If You Go Over the Limit

You still won’t have to pay tax on gifts with values over the annual threshold unless you’re extremely generous and your estate is worth many millions of dollars at the time of your death. Annual gifts you make during your lifetime that exceed the exclusion for the applicable year can be carried over to the value of your estate, making it subject to a lifetime gift and estate tax exclusion of $13.99 million as of 2025.

You do have to notify the IRS annually of any non-exempt portion you’re carrying forward, however. This involves filing IRS Form 709.

“Gifts over the $19,000 annual limit don’t automatically trigger tax,” says Laura Cowan, an estate planning attorney and founder of 2-Hour Lifestyle Lawyer. “The excess reduces your lifetime exemption. You need to file Form 709 if the gift to an individual exceeds the annual exclusion per person per year. If you give $20,000 to one person, you have to file 709. If you give $18,000 each to 10 people, no filing is needed.”

Yes, you read that right. You can gift well more than $1 million in 2025. You can give up to $13.99 million by combining your annual gifts with the value of your estate. But we’re talking taxes here, and taxes involve the government, so it should come as no surprise that a catch is looming on the horizon.

Effect of the Tax Cuts and Jobs Act

The federal Tax Cuts and Jobs Act (TCJA) effectively doubled the lifetime gift and estate tax exclusion when the law passed in December 2017 but this provision is set to expire at the end of 2025. The lifetime exclusion will plunge back to pre-2018 limits at that time if Congress doesn’t take steps to renew this provision. The pre-2018 exclusion was $5 million although the figure will be adjusted for inflation.

You might want to consider some legal workarounds and give as much as possible before December 2025 comes to a close. The IRS indicated in November 2019 that taxpayers who take advantage of the increased exclusion won’t be adversely affected when the terms of the TCJA expire.

Workarounds and Exceptions

Not only can each spouse give the same individual $19,000, but they can also give the same individual $19,000 on Dec. 31 and the annual exclusion amount for the new year on Jan. 1, effectively doubling it in this respect as well. It’s a per-year limit. You and your spouse can give your child and their spouse $76,000, each of you gifting the $19,000 limit to each of them without carrying any portion over to a future year.

The lifetime exclusion also includes a portability provision that you can make use of if you’re married. You can transfer any unused portion of your $13.99 lifetime gift and estate tax exclusion to your spouse if you should die in 2025 or up to the amount of the 2026 limit if Congress doesn’t take action to maintain the TCJA provisions beyond the Dec. 31, 2025, deadline.

Some loopholes exist with regard to the type of gift you’re making as well. “One item to be aware of if you’re likely to exceed your lifetime exemption is that certain types of gifts aren’t taxable,” advises Matt Hylland, a flat-fee, fee-only financial planner and investment advisor at Arnold and Mote Wealth Management in Cedar Rapids, Iowa. “Paying tuition or medical expenses isn’t considered a taxable gift. If you can direct your support for your family to directly pay for tuition or medical expenses, you may be able to avoid some gift tax liability.”

The Bottom Line

The federal tax rate on gifts and estates is a cringeworthy 40% as of 2025. You’ll have to pay it if you neglect to file Form 709 to keep the IRS up to speed on your annual gifts or if your gifts exceed the lifetime exclusion that’s in place in the year of your death. Planning and taking advantage of tactical gifting can be critical if you enjoy a high-net-worth estate, particularly if the TCJA terms expire in 2026.