Dad wants to gift us money to my family - how do gift taxes work?

You're in luck! The gift tax is fairly straightforward, though many people misunderstand how it works. The person GIVING the gift (your dad) is the one responsible for any gift taxes, not the recipient. As of 2025, the annual gift tax exclusion is $18,000 per recipient. This means your dad can give up to $18,000 to EACH person in your family without having to report it to the IRS or pay any gift tax. So in your case, he could give $18,000 to you, $18,000 to your husband, and $18,000 to each of your children - that's $72,000 total to your family in a single year with zero tax consequences! If he wants to give more than $18,000 to any individual, he would need to file a gift tax return (Form 709), but he still might not owe any actual tax due to the lifetime gift and estate tax exemption (which is over $13 million per person in 2025). Your dad's strategy of splitting it across years makes sense if he wants to avoid the paperwork of filing a gift tax return, but it's not necessary from a tax-paying perspective unless he's given away millions already.

When my parents decided to help us financially, I was totally lost about all the tax implications. A friend recommended checking out https://taxr.ai to get clarity on the gift tax rules. They have this cool service where they analyze your specific situation and explain exactly how the gift tax would apply. In my case, my parents were worried about the "gift tax limit" but after using the service, we learned they could actually give quite a bit more than they thought without any tax issues. The site breaks down both the annual exclusion amount ($18k per person) and the lifetime exemption amount in really simple terms. They also helped us understand how to properly document everything just in case of future audits. Definitely worth checking out if you're trying to figure out the best approach for your family.

Just wanted to follow up on my skeptical question about taxr.ai - I decided to try it, and I'm actually really impressed. I had a complicated situation where my parents wanted to gift me money but also help my sister with her student loans, and we weren't sure how to structure it. The service walked me through exactly how the annual exclusion works vs. the lifetime exemption and gave me specific documentation templates for everything. They even explained how my parents could pay my sister's educational institution directly as a qualified transfer that doesn't count toward the annual limit at all. Saved me from making some mistakes that could have created unnecessary paperwork. Definitely more helpful than the generic advice I was finding on financial blogs.

I see lots of advice here about gift tax limits, but if you're also trying to get in touch with the IRS to clarify any of this, good luck with that! I spent 4 hours on hold last week trying to get someone to answer a gift tax question. Then I found https://claimyr.com which basically holds your place in the IRS phone queue and calls you when an agent is about to pick up. You can watch how it works at https://youtu.be/_kiP6q8DX5c - it's pretty slick. I was honestly shocked when my phone rang and there was actually an IRS person on the line! The agent explained that while gift recipients don't pay tax, there are specific rules about how gifts need to be reported if they exceed the annual exclusion amount. Definitely worth getting correct info directly from the IRS if your dad is gifting substantial amounts.

Ok so I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway because I was desperate to talk to someone at the IRS about my parents' gift tax situation. I submitted my request around 10am, went about my day, and got a call back around 1:30pm. When I answered, there was an actual IRS agent on the line! No waiting, no automated system - just straight to a human who answered my gift tax questions. The agent explained that even though my parents need to file a gift tax return for amounts over $18,000 per person, they likely won't owe any tax because of the lifetime exemption. Saved me hours of frustration and got me the exact information I needed. Definitely worth it if you need actual clarification from the IRS.

One thing nobody has mentioned - your dad should keep good records of all gifts, especially if he ever goes over the annual exclusion amount and has to file Form 709 (the gift tax return). The IRS looks at lifetime giving, so documentation matters. When my parents gifted me money for my house down payment, they wrote a simple letter stating it was a gift with no expectation of repayment, signed and dated it, and kept a copy for their records. This helped with both the mortgage company and potential future tax questions.

Be careful with gifts to children - depending on how much and how it's set up, there could be kiddie tax implications if the money generates a lot of investment income. For smaller amounts it's usually not an issue.

This is such great advice from everyone! Just wanted to add one more consideration - if your dad is concerned about the paperwork aspect of filing Form 709 for gifts over $18k per person, he might want to consider making the gifts in January rather than later in the year. That way if he decides to spread larger amounts across multiple years, he maximizes the time between gift dates. Also, since you mentioned you have young kids, your dad might want to look into educational gift strategies. He can pay tuition directly to educational institutions (including private school, tutoring, etc.) without it counting toward the annual gift limits at all. Same goes for medical expenses paid directly to healthcare providers. These "qualified transfers" are completely separate from the $18k annual exclusion amounts. One last thought - if your family is in different states, make sure to check if there are any state-level gift tax implications. Most states don't have gift taxes, but a few do, and the rules can be different from federal requirements.