How is the gift tax exclusion calculated for gifts to multiple recipients?
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The gift tax annual exclusion is calculated on a per-recipient basis, meaning that a donor can give up to the annual exclusion amount to each individual recipient in a calendar year without incurring gift tax or using any of their lifetime exemption. For 2025, the annual exclusion amount is $19,000 per recipient.
1. Key Principles for Calculating the Exclusion
- Per-Recipient Limit: The exclusion applies to each donee. For example, if a donor gives $19,000 to each of five individuals in 2025, none of those gifts are taxable, and no gift tax return is required (unless other reportable gifts are made).
- Present Interest Requirement: The exclusion only applies to gifts of present interests—where the recipient has an immediate right to use, possess, or enjoy the property. Gifts of future interests (where enjoyment is postponed) do not qualify for the exclusion.
- Trusts and Multiple Beneficiaries: If a gift is made to a trust with multiple beneficiaries, the exclusion can apply to each beneficiary, but only to the extent each has a present interest. For example, if each beneficiary has an immediate, ascertainable right to a portion of the trust corpus (such as a right to withdraw a pro rata share), the exclusion applies to the amount each is certain to receive.
- In Rev. Rul. 80-261, the IRS held that if each beneficiary is assured of receiving a minimum amount (even if subject to a demand right), the exclusion applies to that minimum amount for each beneficiary.
- Gift Splitting by Spouses: Married couples can elect to "split" gifts, treating all gifts made by either spouse as made one-half by each. This effectively doubles the exclusion per recipient (e.g., $38,000 per recipient in 2025 if gift splitting is elected), but both spouses must file a gift tax return to make the election.
- Exclusion for Gifts to Non-Citizen Spouses: The annual exclusion for gifts to a spouse who is not a U.S. citizen is higher ($190,000 in 2025), but this is a separate rule from the general per-recipient exclusion.
2. Calculation Example
Suppose a donor gives the following in 2025:- $19,000 to each of three children- $25,000 to a fourth child
- The first $19,000 to each child is excluded.
- For the fourth child, $19,000 is excluded; the remaining $6,000 is a taxable gift and must be reported on Form 709, but no gift tax is due unless the donor has exhausted their lifetime exemption.
If the donor gives $19,000 to each of 10 people, the entire $190,000 is excluded from gift tax.
3. Special Cases
- Gifts to Trusts: If a trust gives each beneficiary a present right to withdraw a share of the gift (a so-called "Crummey power"), the exclusion applies to each beneficiary's withdrawal right, up to the annual limit.
- Gifts of Future Interests: No exclusion applies; the entire value is a taxable gift.
4. Summary
- The annual exclusion is applied per recipient, per year, for gifts of present interests.
- For gifts to multiple recipients, multiply the exclusion amount by the number of recipients to determine the total amount that can be given tax-free.
- For gifts in trust, the exclusion applies to each beneficiary with a present interest, up to the amount each can demand or is certain to receive.
- Any amount given to a recipient in excess of the exclusion is a taxable gift and must be reported.
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