Stop Worrying About the Gift Tax

​One of the most common misconceptions we hear is: "I'd like to give my kids some money, but I don't want to get hit with gift tax."

​The good news is for most families, gift tax is something you'll never actually pay.
 
Let's clear up a few common myths.
 
Myth #1: If I Give My Child More Than the Annual Exclusion, I'll Owe Gift Tax
Not necessarily.
 
Each year, you can give up to the annual gift tax exclusion amount to as many individuals as you'd like without any reporting requirement. Beginning in 2026, that annual exclusion is $19,000 per recipient.
 
If you're married, you and your spouse can combine your exclusions and give $38,000 to each child, grandchild, or other person each year without filing a gift tax return.
 
What Happens If You Give More?
Suppose you give your daughter $100,000 this year.
 
Does that mean you owe gift tax?
 
Almost certainly not.
 
You'll generally need to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, to report the gift. The amount above your annual exclusion simply reduces part of your lifetime gift and estate tax exemption.
 
For most taxpayers, no tax is actually due.
 
The Lifetime Exemption Is Enormous
The federal lifetime exemption allows you to transfer millions of dollars during your lifetime or at death before any federal gift or estate tax is owed ($15,000,000 per person to be exact for 2026).
 
While Congress can change exemption amounts over time, the current limits remain far beyond the assets of most American families.
 
As a result, filing a gift tax return is often just a reporting requirement—not a tax bill.
 
Don't Let Tax Myths Prevent Good Financial Decisions
We've seen parents delay helping adult children because they're worried about taxes.
 
Maybe it's assistance with:

• A down payment on a home
• Paying off student loans
• Starting a business
• Unexpected medical expenses
• Grandchildren's education
• Building an emergency fund

 
If helping now improves your family's financial well-being, don't let misconceptions about the gift tax stop you from exploring the option.
 
A Few Exceptions Worth Knowing
Some payments aren't considered taxable gifts at all when made correctly.
 
For example, you can generally pay:

• Qualified tuition directly to an educational institution.
• Medical expenses directly to a healthcare provider.

 
These payments are generally not subject to the annual gift tax exclusion and do not reduce your lifetime exemption.
 
Before Making a Large Gift
Large gifts can have implications beyond gift taxes, including:

• Estate planning
• Basis considerations for appreciated assets
• Medicaid planning
• State estate or inheritance taxes (in certain states)
• Family fairness and documentation

 
It's always a good idea to discuss significant gifts with your tax and estate planning advisors beforehand.
 
The Bottom Line
For most families, the fear of gift tax is far greater than the reality.
 
Giving more than the annual exclusion usually means filing a form—not writing a check to the IRS.
 
If you're considering making a substantial gift to children or grandchildren, we'd be happy to discuss the tax rules and help you structure it in the most tax-efficient manner.