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2020 Gift Tax Exclusion Amount

2020 Gift Tax FAQ


What is a gift tax?

The gift tax is charged by the IRS when money or property is transferred from one party to another with nothing given in return.  The tax is incurred by the giver and not the recipient.  The IRS sets a gift tax exclusion amount every year.


What is the gift tax exclusion amount for 2020?

The 2020 gift tax exclusion amount is $15,000.  This means that the most you can give to one individual in 2020 is $15,000 without incurring any tax consequences.  If you are married, both you and your spouse can gift $15,000 each to the same recipient and that total $30,000 gift will not require a tax filing.  There is no limit to how many people you can gift in a year and you can give up to $15,000 each to as many recipients as you like up to the lifetime exclusion limit. 


What is the Lifetime Exclusion?

The IRS provides for a “lifetime exclusion” that enables you to give, tax-free, up to a total amount in your lifetime.  As of 2020, the lifetime exclusion amount is $11.58 million. If you don’t give $11.58 million during your lifetime, your estate can give the remaining balance tax free to your heirs upon your death.  Anything over the $11.58 million amount will be taxable.


How does it work?

Let’s say you give two people $15,000 each and a third $45,000.  The first two automatically qualify for tax exemption but the third exceeds $15,000 making $30,000 of that gift potentially taxable.  However, if you have yet to reach your lifetime exemption of $11.58 million, the $30,000 will not be taxable. You will still file that gift amount in your Federal tax returns using IRS Form 709.   Essentially, the IRS will keep tabs on your gifts given over the years and if you go over the maximum lifetime exclusion threshold, you will incur a tax consequence for the overage.

Exceptions to 2020 Gift Tax

Fortunately, some gifts are tax-free regardless of the amount.  These gift scenarios include:


  • Gifts to a spouse who is a US citizen (the tax exclusion for non-US citizen spouses is $157,000 in 2020)
  • Gifts to a charity are considered donations and are therefore not taxable
  • Gifts for tuition and other qualified educational expenses that are made directly to an educational institution (don’t give your granddaughter that $50,000 tuition check directly – make it out to her school)
  • Gifts to cover medical expenses for someone else that are made directly to the medical provider (pay the hospital directly and not the patient)
  • Gifts to a political organization (know your Federal Election Commission contribution limits)

Tips on Giving Money While Avoiding the Gift Tax:

Giving College Money

If you are inclined to gift a large amount to help pay for college costs for your grandkids, try to spread the amount over the years they are in school versus giving it all at once up front.  If you are able to limit to $15,000 a year you will incur no tax consequences or contribute to your lifetime gift exemption tally.  Alternatively, gift the entire amount to the school directly and completely avoid any tax consequences at all.


Medical Bills

You can avoid gift taxes altogether, regardless of amount given, if you pay the medical provider directly.


Friends and Family Loans

Interest-free loans are considered gifts in the eyes of the IRS, so be sure to charge an interest rate and document the loan in writing to avoid any tax consequences.  If you transact a loan that doesn’t get repaid, the unpaid amount will be considered a gift. Use the LendAmi Friends & Family Loan Agreement Template when loaning money to drive a good outcome and safely avoid taxes.


Shared Bank Accounts

Unless you are sharing a bank account with your spouse, shared accounts can incur gift tax consequences.  The uncle who is kind enough to put his nephew on his account may find himself in a tax situation if the nephew is able to take out money.  Those withdrawals are considered gifts and subject to the gift tax exclusion amount.

Additional Resources for Documenting Loans to Avoid Taxes