Gift Tax FAQs What does gift tax mean? A gift tax is a type of federal tax levied on gifts made to specific individuals. It applies to money and other property given as presents, including real estate. The Internal Revenue Service (IRS) imposes gift taxes on the donor based on annual and lifetime limits. How much is the gift tax? The amount of gift tax owed depends on the value of the gift and the annual and lifetime limits. Exceeding such limits can trigger the gift tax. Rates vary from 18% to 40%. Who pays the gift tax? The donor, or giver of the gift, is typically responsible for paying the gift tax. Do you need to pay taxes when you receive a gift? No, you are not usually responsible for paying taxes on a gift. The donor must pay the associated tax if either annual or lifetime limits are exceeded, unless you volunteer to pay it on their behalf. You may also pay capital gains tax if you sell the gift later. How do you avoid the gift tax? You can avoid the gift tax by not exceeding the annual and lifetime limits. Additionally, some gifts are not included in the calculation of gift taxes, such as those made to a spouse or qualified charities. Some strategies may also allow you to reduce your potential liability for gift taxes, like splitting with a spouse, structuring gifts, and gifts in trust. About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.