For 2023, individuals can give away $17,000 per recipient without incurring federal gift taxes or using up any portion of their $12.92 million lifetime transfer-tax exemption. Spouses can give away a combined $34,000. These gifts need to be received and deposited by the recipient by December 31 to qualify. Annual gifting can be an effective way to reduce your taxable estate.

For those interested in funding 529 (education) plans, there are special rules that allow “superfunding” 529 accounts with five years worth of “annual gifts." See the 529 Plans for Education Savings section.

There are several things the IRS does not consider a gift. You may give an unlimited amount in these categories without gift tax consequences.

• Transfers to spouses who are U.S. citizens
• Charitable donations
• Tuition paid directly to educational institutions on behalf of someone else
• Funds paid directly to medical service or health insurance providers on behalf of someone else
• Gifts to a political organization for its use