When would I pay a gift tax in 2025? Any exemptions?

Thanks for explaining! So if I gave my son $20,000 this year, I'd only need to report the $2,000 that's over the limit on my taxes? Would I actually pay any tax on it? And does it matter if I'm giving cash vs paying his tuition directly?

For a $20,000 gift to your son, yes, you'd need to file Form 709 (gift tax return) to report the $2,000 excess, but you wouldn't actually pay any tax unless you've already used up your lifetime exemption of about $13.6 million. The form basically just keeps track of how much of your lifetime exemption you've used. If you're paying tuition directly to an educational institution, that's completely exempt from gift tax regardless of the amount! Same goes for medical expenses paid directly to healthcare providers. These are special exceptions in the tax code that don't count toward your annual or lifetime limits at all.

Does it actually work with complicated situations? I'm trying to gift some property to my kids and the valuation is all over the place. Can it help with figuring out if I need to file Form 709?

I'm skeptical about these online tools. How accurate is it compared to what a CPA would tell you? I had a bad experience with TurboTax misguiding me on some investment stuff last year.

Yes, it absolutely handles complex situations! I uploaded documents about a partial property transfer my parents were considering, and it identified exactly which parts would be subject to gift tax reporting and showed how to structure it to minimize paperwork. It's very accurate in my experience. I actually had my uncle (who's a CPA) review the analysis, and he was impressed with how thorough it was. The difference is it uses AI to analyze the specific documents you upload rather than generic advice. It caught nuances about gift timing across tax years that would have triggered unnecessary filing requirements.

I don't get it - how does this actually work? Do they have some special connection to the IRS or something? Seems weird that they could get through faster than I could on my own.

Yeah right. There's no way they get through the IRS phone lines that quickly when regular people are waiting for hours. Sounds like a scam to me. If it was that easy, everyone would be doing it.

They don't have special IRS connections - they use technology to continuously redial and navigate the phone system. Think of it like having someone who's job is solely to wait on hold for you. When they finally get through, they connect you to the live agent. I was skeptical too! But I tried it after spending literally 3 hours on hold one day and getting disconnected. The difference is they have systems constantly dialing that can detect when hold queues open up. I got actual clarification on my gift splitting question from an IRS agent, which saved me from potentially filing incorrectly. Can't put a price on that peace of mind.

That's really helpful! So in my case with my niece, would it be better to pay her student loans directly to the loan provider instead of giving her the cash? Would that still qualify for the medical/education exception?

Unfortunately, paying off someone's existing student loans doesn't qualify for the unlimited education exclusion. The education exception only applies to tuition paid directly to the educational institution while someone is attending. For existing student loans, you're better off staying within your annual gift exclusion of $18,000. If you want to pay more than that toward her loans in a single year, you'd need to file Form 709 to report the excess amount against your lifetime exemption (though you still wouldn't owe actual tax unless you've used up the lifetime amount).

Yes, you and your husband can each give your daughter $18,000 in 2025, for a total of $36,000, without having to file a gift tax return! This is called "gift splitting" and it's a common strategy for married couples.