Smart Gifting: Helping Family While Making the Most of Tax Benefits

A question that I get asked frequently at this time of the year is about the guidelines for gifting to children, grandchildren, and other family members and the tax implications. For the 2026 tax year, the annual federal gift tax exclusion is $19,000 per person, per recipient. For a married couple, it is $38,000, as each spouse can gift $19,000. This means that a married couple can give $38,000 to each child, grandchild, or anyone else in 2026 without generally having to file a gift tax return, provided each spouse makes their own gift.

They can gift more than that as well but generally will need to report the additional amount to the IRS. You only need to worry about paying federal gift taxes if your cumulative taxable gifts exceed the lifetime gift and estate tax exemption, which is an exceedingly high $15 million per individual in 2026, assuming no prior use of the exemption. So, a single parent can gift each of their children, grandchildren or any other person $19,000 without worrying about federal gift taxes or additional reporting requirements.

Additionally, gifting can be a valuable tax and estate planning strategy, particularly for parents or grandparents who have appreciated investments. There may be opportunities to transfer wealth to the next generation while also reducing the family's overall tax burden. However, there are several considerations, and the right strategy depends on each family's circumstances.

Generally, the person receiving the gift does not need to declare the gift as taxable income to the IRS. Gifting can be a great way to help family members while also taking advantage of some tax and estate planning opportunities. Before making significant gifts, it is worth having a conversation with your financial advisor to understand how gifting can fit into your overall financial plan.