Gift Tax Issues for 2025: Key Tax Law Changes

Jason Winter, JD, EA
The federal gift tax is imposed on the transfer of money or property during your lifetime. Both the fair market value and the basis of the property should be reflected on the donor’s gift tax return. While a detailed description of all the planning possibilities is beyond the scope of this article, there are certain basic gifting issues and tax law changes for 2025 about which taxpayers should be aware.
Key Changes for 2025
A gift tax return is generally not required to be filed if all gifts to various donees do not exceed the annual exclusion amount. In 2025, you can give $19,000 per donee without triggering a reporting requirement; the exclusion amount was $18,000 in 2024.
Gifts that are in excess of the annual exclusion amount referenced above will be applied against the donor’s lifetime exemption amount, which in 2025 is $13.99 million (increased from $13.61 million in 2024). This means that lifetime gifts in excess of the annual exclusion that collectively add up to less than $13.99 million in 2025 will not require a payment of tax, since such amounts are within the exemption threshold. So, while gifts in excess of the annual exclusion will be subject to gift tax, they won’t result in a tax payment due until such taxable amounts exceed the lifetime exemption.
It should be noted that as the law currently stands, the present $13.99 million lifetime exemption is scheduled to sunset and be reduced considerably in 2026 (to the inflation-adjusted, pre-2018 level – projected to be between $6 and $7 million); this sunset provision may or may not be updated or changed by future legislation and will certainly affect planning considerations in the future – please reach out to your Louis Plung & Company professional for updates.
Spouses & Gift-splitting
If a donor is married, he or she may decide to split gifts in half with a spouse and, in effect, reduce the amount that would be subject to tax by half. Spouses do notfile joint gift tax returns and must agree to split the gifts and properly report them on their own Form 709. To reflect their agreement, there is a new Part III on Form 709 that includes “Spouse’s consent on gifts to third parties” (i.e., any party who is a non-spouse). In prior years, a spouse was required to sign the donor’s Form 709 if gifts were split, but on the 2025 Form 709, the spouse must now sign a “Notice of Consent”that will be attached to the donor’s return.
Other Updates to Form 709
The layout of Schedule A has changed, with the addition of check-box columns to identify (a) charitable gifts, (b) deductible gifts to a spouse, and (c) a “reverse Qualified Tuition Plan (QTP)” (IRC 2652(a)(3)) election. It isn’t known at this time whether a failure to check the boxes when appropriate will result in failure to adequately disclose a gift to the IRS, meaning that the filing would be incomplete. Further guidance is needed from the IRS, but taxpayers and practitioners must be aware of the possible pitfall.
In addition, there is a new question regarding the transfer of digital assets that must be answered either “yes” or “no” and there is a space for reporting the gift, as appropriate. A digital asset is “any digital representation value that is recorded on a cryptographically secured distributed ledger or any similar technology.” This includes non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. If an asset has these characteristics, it will be treated as a digital asset for federal gift and estate tax purposes and is subject to reporting.
Gifts to Qualified Tuition Programs (QTPs or 529 Plans)
Contributions by donors to QTPs in excess of the annual exclusion amount and less than five times the annual exclusion amount may be treated as if the gift were made ratably over a five-year period. This 529 election allows the donor to apply the annual exclusion to a portion of the contribution in each of the five years succeeding the gift. For 2025, a donor can use this election for a maximum $95,000 contribution. Donors should be aware that there is a particular reporting scheme associated with this type of gift, which your Louis Plung professional can explain in more detail.
Valuation Discounts
The value of gifts made to donees may be discounted for a “lack of marketability, a minority interest, a fractional interest in real estate, blockage, market absorption, or another reason.” These discounts must be appropriately reported on Form 709, and an explanation “giving the basis for the claimed discounts and showing the amount of the discounts taken.” It is imperative that the discount claimed is adequately documented by a supporting valuation, otherwise it will be rejected by the IRS.
Summary
It is important that gifts are properly disclosed and reported to the IRS in order to make sure that gifting and estate plans are implemented in accordance with donors’ desires. Remember to seek the assistance of a Louis Plung advisor for additional information and help with proper reporting.