How does the US gift tax work?
The US taxes large lifetime gifts. Each year you can give up to the annual exclusion ($18,000 per recipient in 2024) tax-free to any number of people. Gifts above that amount reduce your lifetime unified exemption ($13.61M in 2024). Only after the lifetime exemption is exhausted do you pay gift tax, at a 40% rate.
What is the annual gift tax exclusion?
The annual exclusion is the amount you can give each person every year without any gift tax reporting or exemption use. In 2024 it is $18,000 per recipient. A married couple who elect gift-splitting can give $36,000 per recipient. There is no limit on the number of recipients.
Do I actually pay gift tax on a large gift?
Usually not right away. Gifts above the annual exclusion are reported on Form 709 and simply draw down your $13.61M lifetime exemption. Out-of-pocket gift tax only applies once your cumulative taxable gifts exceed that lifetime exemption, which few people reach.
How is US gift tax different from Canada?
Very different. The US imposes a true gift tax integrated with its estate tax through a shared lifetime exemption. Canada has no gift tax at all — instead, giving away appreciated property triggers capital gains tax through a deemed disposition. The US uses stepped-up basis; Canada does not.