Financial gifts from parents can provide significant help, whether it’s for college tuition, buying a home, or starting a business. However, such generosity comes with tax considerations. Understanding the rules around gift taxes can help Tyler residents make informed decisions about their financial and estate planning strategy and avoid unnecessary surprises. Here's what you need to know about paying taxes on financial gifts in 2025.
The gift tax is a federal tax applied to the transfer of assets—such as money, property, or other valuables—without receiving something of equal value in return. While the person giving the gift (the donor) typically pays the tax, there are specific exemptions that often eliminate the need for payment or filing.
A Kiplinger article reports the IRS updated annual gift tax exclusion for 2025 that allows individuals to gift up to $19,000 per recipient without triggering any reporting requirements. Married couples can double this amount, collectively giving $38,000 per recipient tax-free.
The short answer is: likely not. Financial gifts under the annual gift tax exclusion are not taxable. If your parents gift you an amount exceeding the annual limit, the responsibility for filing a gift tax return (IRS Form 709) falls on them—not you.
If the gift exceeds $19,000 per parent in 2025, the excess amount will count against their lifetime estate and gift tax exemption, which is $13.99 million per individual in 2025. Only gifts that surpass this lifetime exemption are subject to the federal gift tax, meaning most Tyler families will not owe taxes who include gifting strategies as part of their estate plan. Read more in our article, Maximizing Tax-Free Giving to Children: Estate Planning Strategies for Affluent Parents
Parents often want to help their children with tuition or other education-related expenses. Payments made directly to an educational institution for tuition are exempt from gift taxes, even if the amount exceeds the annual gift tax exclusion. However, funds given directly to a child for books, room, or board are considered taxable gifts.
Similar to education costs, payments made directly to a healthcare provider for medical expenses are not subject to gift taxes. This exemption applies only to payments for qualifying medical services.
Gifting money to help a child purchase a home can raise tax and mortgage eligibility issues. Gifts over $19,000 in 2025 will require the donor to file a gift tax return. Additionally, mortgage lenders may require documentation confirming the funds are a gift, not a loan.
Transferring real estate as a gift involves additional considerations. The gift’s value is determined by its fair market value, and the donor may need to file a gift tax return if the value exceeds the annual exclusion.
The lifetime estate and gift tax exemption is the total amount a person can give during their lifetime or leave as part of their estate without incurring federal taxes. In 2025, this amount is $13.99 million per individual, or $27.98 million for married couples.
The current high exemption is set to expire at the end of 2025, potentially reverting to approximately $7 million per individual in 2026. For families with significant wealth, this makes 2025 an ideal year to maximize tax-free gifts.
The gift giver (donor) is responsible for paying any gift tax. The recipient does not owe taxes on the gift, regardless of the amount.
If the gift exceeds the annual exclusion ($19,000 in 2025), the donor must file IRS Form 709. However, no tax is due unless the donor’s total gifts exceed their lifetime exemption.
Yes. Gifts to a spouse, charitable donations, and payments made directly to educational or medical institutions are automatically exempt from gift taxes.
Navigating gift tax rules can be complex, especially when planning for significant financial gifts. At Campbell Law Firm, we help families in Tyler, TX, and surrounding areas create strategic estate plans to maximize tax savings and protect their legacy.
Whether you're receiving financial gifts or planning to give, understanding the tax implications is essential. By working with a trusted estate planning attorney, you can ensure your wealth is transferred efficiently and in line with your wishes.
At Campbell Law Firm, we have over 35 years of experience helping families with Tyler estate planning. Book a consultation today to discuss your goals and secure your financial future.
