A gift tax is a federal levy that applies to transferring money or property without receiving something of equal value in return. Its purpose is to discourage income tax evasion by individuals who wish to avoid paying taxes on the capital gains of property sold or other gifts they make. Some states have their own version of this tax. California does not have such a tax, so its residents are subject only to the federal estate and gift tax.

The good news is that the IRS has a lifetime exemption limit that makes it possible to move large sums of money between loved ones free of taxation. In addition, there are a number of strategies that can help people minimize the impact of a federal estate or gift tax.

In general, for 2024 you can give up to $18,000 per person without incurring any gift tax liability. If you want to give more than that, you will have to file a gift tax return. You will also need to consider your lifetime gift and estate tax exemption limit when preparing your strategy.

If you are considering giving away large sums of money or assets, you should consult with a financial advisor to develop a gift tax strategy. SmartAsset’s free matching tool can help you find a financial advisor to develop a personalized plan. If you decide to work with an advisor, they will typically be responsible for paying any gift or inheritance tax that may be due. However, under special circumstances, the recipient of a gift could agree to pay the tax in lieu of the donor.