My friend told me they had to file a tax return for gifts they made last year. Do I really have to pay taxes on any gifts I make to family or friends during my lifetime and is it better to wait until I die to give away my assets?
This is certainly a timely question, as many individuals with taxable gifts are in the process of submitting their federal gift tax returns, Form 709s, prior to the October 15th extension deadline. However, there is an important distinction between being required to file a gift tax return and owing gift tax in any given year. Form 709 is used to report gifts that use up an individual’s lifetime gift and estate tax exemption amount, currently $15,000,000 in 2026 (or $30,000,000 for married couples). Accordingly, while the exemption amount has historically been adjusted for inflation and could be meaningfully reduced or expanded in the future by congressional action, at present most people’s gifts and estates will not be subject to a federal 40% gift and estate tax (Note New Hampshire does not impose a separate state gift or estate tax).
Moreover, depending on the amount or type of gift, you may not even be required to file Form 709. For example, in 2026 you can give up to $19,000 per individual, an amount known as the annual gift tax exclusion amount, without using up your lifetime exemption or typically requiring a gift tax return filing. This amount increases to $38,000 per individual if you and a spouse elect to split gifts, although you may still be required to file a gift tax return to report the gifts and gift splitting under certain circumstances. The gift tax exclusion amount may also change annually. We recommend confirming the exclusion amount then in effect before making somewhat larger gifts.
Other types of gifts, including gifts to a U.S. citizen spouse and certain qualifying gifts for tuition, medical bills, and charitable donations, will neither reduce your lifetime exemption nor be subject to the annual exclusion amount.
With that said, there are other tax and estate planning factors to keep in mind when considering making gifts. While many people contemplate gifting cash or other property (such as a home) to family members or friends during their lifetime rather than waiting until death, there are often benefits to leaving your property though a Will or Revocable Trust. Real estate, highly appreciated securities, closely held business interests, and artwork are common examples of assets that will benefit from receiving a step-up in cost basis to date-of-death value when transferred upon death, meaning your loved ones could realize significant capital gains savings when compared to a lifetime gift. In addition, there may be Medicaid lookback or other practical considerations related to lifetime gifts, such as a loss of control over the assets, how they are distributed, or future changed circumstances.
Accordingly, while the everyday gifts most people give, like holiday and birthday presents, rarely require a gift tax return, we recommend discussing any significant gift considerations with an attorney who can advise you of any implications and help you decide whether, when, and how to make the gift.