The federal gift tax applies to transfers of money or property to another person during your lifetime.
The federal gift tax applies to transfers of money or property to another person during your lifetime. The annual exclusion ($19,000 per recipient in 2026) and the lifetime exemption ($15M) mean most gifts are tax-free — but reporting may still be required.
Gifting during life can transfer wealth to the next generation efficiently, reduce a taxable estate, and help family members financially when they need it most. But it also sacrifices the step-up in basis and reduces your future Medicaid lookback protection.
Paying tuition or medical bills directly to the institution is unlimited and doesn't count as a gift at all. For grandparents helping with college, paying the school directly is often better than contributing to a 529.
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