As the costs of weddings and homes have skyrocketed, many families want to help their children achieve these milestones by offering financial support. However, the growing expense of these gifts has made tax planning for affluent families more complicated than ever.
If you’re even considering a large gift to fund a wedding or help with a down payment or home renovation, it’s important to understand the potential estate and gift tax implications and reporting requirements before you make the gift.
Bonus: If you’re interested in the idea of trying to help your loved ones now (when they need it) rather than just at your death, read the book Die With Zero by Bill Perkins. It’s much different than it sounds and it’s thought provoking and gets you thinking about how and when to spend and to gift wealth and resources.
Real-Life Examples: Weddings and Home Purchases
Imagine giving $55,000 or more to cover your child’s wedding expenses.
While this is a generous gesture, it exceeds the annual gift tax exclusion for 2025, which allows individuals to give up to $19,000 per person tax-free each year. Each spouse can make this gift so that the total sheltered amount would be $38,000.
If, for example, the wedding cost $78,000, and both spouses were alive, the excess over the annual gift tax exclusion would be $40,000. And, while there would be no tax, you would need to report the gift to the IRS. While there would be no tax due for most people (because you also have a $13,990,000 total lifetime and death exemption (due to reduce back to $ 5 million at the end of 2025) you would need to report the gift and use part of that exemption.
The long and short of it that this seemingly simple transaction (giving money to a child or children for weddings) can trigger some important actions and possible tax issues.
INSIGHT: If you’re making gifts to any one person that exceed $19,000 then consider getting some advice from your tax advisers and coordinating with your estate planning attorney.
2. Helping with a Home Purchase or Remodel:
Now consider a $100,000 gift to help your child buy or renovate a home.
If the gift is from both you and your spouse, you can exclude $38,000 (the 2025 combined annual exclusion for a couple). The remaining $62,000 would also need to be reported to the IRS and deducted from your lifetime exclusion amount. Again, if you’d already used those exemptions (many people are to avoid the loss of this bonus exemption if the law changes at the end of 2025) then you would actually owe a 40% tax on the gifted amount not covered by that annual gift tax exclusion.
While these gifts may not result in immediate taxes, for most people, they do require careful planning—and proper reporting (on the 709 gift tax return).
3. Helping With Tuition:
These same rules apply to gifts for the educational expenses of children and grandchildren with one big and very important exception. If you make tuition payments directly to the institution, those payments don't count against your annual gift tax exclusion.
That brings us to…
The Often-Overlooked Requirement: Filing Form 709
Many people don’t realize that gifting amounts exceeding the annual exclusion triggers a requirement to file IRS Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return.
This form ensures the IRS tracks how much of your lifetime exclusion has been used. And, it was recently revamped and expanded for 2024 returns to require much more detail and reporting information.
For 2024, the lifetime gift and estate tax exclusion was set at $13.61 million per individual (or $27.22 million for a couple) and, in 2025 it grew to 13,990,000 per person and double that for a married couple. As long as your total lifetime gifts remain below this limit, you won’t owe gift taxes, but you must still report any gifts above the annual exclusion on Form 709. Failing to file can lead to IRS scrutiny and complications for your estate plan later (and your heirs and executors/trustees).
Strategies to Minimize Tax Impact
While large gifts may require reporting, there are strategies to reduce or even avoid gift tax consequences. They are often quite complicated, and generally you’ll benefit from good advice. But here are a few to get started:
- Gifting by Both Spouses: If you and your spouse both give, you can double the annual exclusion for a single recipient. For example, gifting $38,000 to your child’s wedding can be divided as $19,000 each from you and your spouse, avoiding the need to file Form 709.
- Gifting to Multiple Recipients: Consider dividing gifts between your child and their spouse or other family members to maximize annual exclusions.
- Direct Payments: Payments made directly to educational institutions for tuition or to healthcare providers for medical expenses are not considered taxable gifts and do not count toward the annual or lifetime exclusion.
- For much more detail on gifting strategies, click here to see our content on advanced gifting strategies and ideas…
Why Proper Planning Is Essential
Gifting is an excellent way to help your children achieve their dreams while reducing the value of your taxable estate, but it requires thoughtful planning and attention to IRS rules. Filing Form 709 ensures compliance and helps protect your long-term financial strategy.
Take Action Today
If you’re planning a significant financial gift, our team can help you navigate the complexities of the gift tax system. From ensuring proper reporting to developing a strategy that aligns with your goals, we’re here to assist. Contact us today at 610-933-8069 to schedule a consultation and create a gifting plan that works for you.
