In 2025, changes in the US Gift tax and Estate tax have surprised everyone. If you are a US citizen and the annual amount you are giving as a gift to your spouse who is not a US citizen then you need to pay gift tax on this amount. This gift tax is increased to $190,000 this year.
Moreover, in 2025 individuals will be free for approximately $14M in estate and gift tax and a married couple can save up to $27M to $28M without paying federal estate and gift tax. For a couple who have gifted already, may gift $760,000 in 2025. This article explains what Gift tax is, what Estate tax is, how these work, the increase in gift tax this year, and the hike in Estate tax in the US.
What is Gift Taxe in The US?
According to the Revenue Department of the US, the Gift tax is a type of tax that applies to any property transfer that is being transferred from one to another individual without getting anything in return. Gift tax is applied to:
- Property Transfer
- Money Gift
- Free or Reduced-cost property in terms of profit
- Selling any property with less value than the actual value
- Decreased rates of interest loans
Who Should Pay Gift Tax?
Commonly, the donor person who gives anything to another person is liable for paying the gift tax. In several cases, the taker person may also offer to pay the tax amount but it must be done with the advice of the tax professionals. Gifts like education expenses, medical costs, gifts to your spouse, or funds to political parties are not included in taxable rules.
Annual Gift Tax Exclusion
In 2025, a fixed amount of $19,000 is set by the IRS for the yearly gift tax exclusion. Donors can give up to this limit for the lifetime that will be tax-free and gift and estate tax exclusion will be more than $13 million. Married couples are allowed to give $38,000 annually per taker from the beginning of 2025.
For example, a married couple having 3 children and 5 grandchildren can give $304,000 to their children per year($38000 each). This amount will be tax-free but it should not cross the limit of $27.98 million gift tax.
Gift Tax in Case of Non-Us Spouse
In 2025, if both spouses are US citizens, they can give any amount to each other without any gift tax but there is an exemption of $27,98 million for combined estate tax. In this case, it will be taxed at the demise of the surviving spouse and transferring property to the survivor.
Gifts to a spouse who is not a US citizen, are not unlimited. Unlimited assets can not be transferred to a non-US spouse.
What Is Estate Tax?
According to the IRS, when your property is transferred to your right owner after your death. It includes an estimation of everything you have at the date of demise. The actual market value is used when the calculation is done. It doesn’t matter what the value was at the time of purchasing. The sum of the values of all these items is called Gross estate. Estate tax includes:
- Cash and securities
- Real estate Property
- Insurance Policies
- Trusts of dead person
- Grants or Annuities
- Business interests
- Other
Things that are not included in Estate Tax
- Mortgages
- Debts
- Estate Expenses
- Property of Surviving spouses
- Property of Qualified Charities
Subtraction of Gross Estate and these Deductions gives your taxable amount.
Who Will Pay Estate Taxes?
An estate tax is paid by the children who are US citizens and if the total market value of the property is calculated more than the filing limit for the year of death.
| Basic Exclusion Amount | 2024 | $13.61 million |
| Basic Exclusion Amount | 2025 | $13.99 million |
Estate And Gift Tax Exemption for Lifetime
If an individual gives a gift as an amount that is more than the annual gift tax exemptions in this case a part of the individual lifetime tax exclusion is used as a taxable amount. The gift and estate tax exemptions are combined, in this situation, the use of an individual’s gift tax exclusions will be reduced and they may be estate tax-free.
Note: Gift tax returns must be filed by April 15 of the following year to report gifts made by an individual more than the annual gift tax exemptions and track the amount of the lifetime exemption that has been used. It should be noted that current changes in US estate and gift tax will reduce the lifetime estate and gift tax exemption by half at the beginning of the year 2026 even though it will rise to $13.99 million in 2025 according to Internal Revenue Services department.
Williams Pihu is a graduate in International Relations from the Georgetown University. With a passion for global politics and news analysis, Williams writes for Information Dissemination, where she covers a wide range of topics related to international affairs.