How Much Is the Gift Tax Rate in 2022?

How much is the gift tax rate in 2022? The federal gift tax applies to gifts worth more than $16,000 in 2022, with the exception of gifts to your spouse. Individual states don't charge a gift tax.

How the IRS Defines a Gift

You can give friends and family members up to $16,000 in untaxed gifts every year, up to a lifetime maximum of $12.06 million. For tax purposes, any property, investments, money or assets you give to someone else without expecting repayment constitutes a gift. Interest-free loans are also considered a gift by the IRS. 

If you sell property for less than its fair market value, the discounted amount counts as a gift as well. For example, if you have a home worth $300,000 and sell it to a family member for $250,000, you have gifted that person $50,000 in the eyes of the IRS. In this case, $16,000 of that gift is tax-free, and you must file a federal gift tax return for the remainder ($34,000).

Some types of gifts aren't subject to the gift tax. This includes gifts of any value to your spouse if they're a U.S. citizen. It also includes gifts that fund a political organization or tax-exempt nonprofit organization, someone else's medical expenses you pay directly to the health care provider or someone else's tuition payments you make directly to the college or university.

What Are the Gift Tax Rates in 2022?

The tax rate increases depending on the amount of the gift that exceeds the $16,000 exclusion. The following list explains the gift tax rates based on the size of the gift:

• 40%: Gifts of $1 million or more
• 39%: $750,001 to $1 million
• 37%: $500,001 to $750,000
• 34%: $250,001 to $500,000
• 32%: $150,001 to $250,000
• 30%: $100,001 to $150,000
• 28%: $80,001 to $100,000
• 26%: $60,001 to $80,000
• 24%: $40,001 to $60,000
• 22%: $20,001 to $40,000
• 20%: $10,001 to $20,000
• 18%: Less than $10,000

How to File a Gift Tax Return

If a gift exceeds the gift tax maximum for that year, you must file IRS Form 709 along with your tax return. When you report this type of gift, the IRS counts it toward your lifetime maximum limit.