Gift Tax Calculator

How Federal Gift Tax Works

The United States imposes a tax on the transfer of property by gift. While the rules can appear opaque, the core idea is straightforward: any time you give away assets without receiving something of equal value in return, the IRS considers that a gift. The gift tax exists to prevent individuals from avoiding estate tax by transferring wealth before death. However, Congress has built in generous exclusions and exemptions so that only substantial transfers are ultimately taxed. This calculator models those rules using the 2024 figures, letting you explore how gifts interact with annual exclusions and the lifetime unified credit.

The first layer of protection is the annual exclusion. Each year you may give up to a specified amount to as many people as you like without those gifts counting against your lifetime exemption or incurring tax. For 2024 the exclusion is $17,000 per recipient. Married couples can effectively double this amount through a technique called gift splitting. Any gift that exceeds the exclusion is a taxable gift and must be reported on Form 709 even if no tax is owed. Taxable gifts accumulate over your lifetime and chip away at the lifetime exemption. The calculator subtracts the exclusion from the gift amount you enter to determine the taxable portion for the current year.

After subtracting the exclusion, the next step is to add the remaining taxable gift to any prior taxable gifts. The sum is your cumulative taxable gifts. Federal law provides a unified credit that shelters a lifetime amount of gifts and estate transfers from taxation. For 2024 this lifetime exemption is $13.61 million. Once your cumulative taxable gifts exceed the exemption, actual gift tax becomes due. If you remain below the threshold, no tax is assessed, but you must still file the proper paperwork so the IRS can track your exemption usage. The calculator compares your cumulative total against the exemption to determine whether any tax is owed.

When tax is due, it is computed using the progressive rate schedule shared with the estate tax. The rates climb from 18% to 40% as taxable amounts increase. To mirror IRS worksheets, the calculator first determines the tax on your total lifetime taxable gifts, then subtracts the tax that would have been owed on your prior taxable gifts. The difference is the tax attributable solely to the current gift. In symbolic form, the calculation can be expressed in MathML as:

where \(T(x)\) represents the tax function, \(C\) is cumulative taxable gifts, and \(P\) is prior taxable gifts. If \(C\) is below the lifetime exemption \(L\), then \(T(C) = 0\) and no gift tax is due. Otherwise, the calculator applies the rate schedule shown below.

The table presents the brackets in the familiar base tax plus marginal rate format. For instance, a taxable amount of $200,000 falls in the 32% bracket. The tax is calculated as $38,800 plus 32% of the amount above $150,000. These base amounts ensure continuity across brackets and match the methodology used on IRS Form 709.

Consider a practical example. Suppose you give $100,000 to a child in 2024 and have never made a prior taxable gift. The first $17,000 is sheltered by the annual exclusion, leaving an $83,000 taxable gift. Cumulative taxable gifts are therefore $83,000. Because this is well below the $13.61 million lifetime exemption, no tax is due, but you must still file a gift tax return. Next, imagine you later give another $14 million in property. Your cumulative taxable gifts now exceed the lifetime exemption by $470,000. The tax on $14,083,000, using the table above, is $5,317,000. The tax on $83,000 is $18,200. The difference—$5,298,800—is the gift tax bill for the second transfer.

The law contains many additional wrinkles, including special rules for tuition and medical payments made directly to providers, valuation discounts for transfers of closely held business interests, and portability that allows a surviving spouse to use a deceased spouse’s unused exemption. The calculator does not address those complexities. Instead, it offers a starting point for understanding how ordinary gifts reduce your lifetime exemption and potentially trigger tax once the limit is crossed. By experimenting with different exclusion amounts, prior gifts, and exemption levels, you can forecast how aggressive gifting strategies will play out over time.

Remember that the lifetime exemption is scheduled to be cut roughly in half in 2026 when provisions of the Tax Cuts and Jobs Act sunset. Many families are accelerating transfers before that date to lock in the higher exemption. This calculator can help analyze such decisions, but it is not a substitute for professional advice. Always consult a qualified estate planner or tax attorney when contemplating large gifts or complex wealth transfer techniques. Tax laws evolve, state taxes may apply, and personal circumstances vary widely. Treat the results as educational rather than authoritative guidance.

Another layer of complexity arises from the generation-skipping transfer (GST) tax, a separate levy imposed when wealth skips a generation, such as gifts to grandchildren or trusts for their benefit. Each donor has a GST exemption equal to the lifetime estate and gift exemption, and careful allocation is required to shield transfers from this additional tax. This calculator does not compute GST liabilities, but awareness of the parallel system is essential when designing long-term wealth transfer strategies.

State laws can further influence gift planning. While most states have abandoned their own gift taxes, a handful maintain estate or inheritance taxes that interact with federal rules. Large gifts may also have Medicaid eligibility implications or trigger filing requirements for certain financial accounts. Coordinating with legal and tax professionals ensures gifts achieve the desired personal or philanthropic objectives without unforeseen consequences.