As the calendar turns toward year-end, many people pause to reflect on family, legacy, and generosity. But there’s a practical, tax-savvy reason that makes now an especially good time to give: using your annual gift tax exclusion for 2025.

What is the Annual Gift Tax Exclusion — and What’s the 2025 Limit?

Each year, the Internal Revenue Service (IRS) sets what’s known as the “annual gift tax exclusion.” For 2025, that exclusion amount is $19,000 per recipient.

What does that mean in practical terms? You can give up to $19,000 to as many individuals as you like— children, grandchildren, friends — without having to file a gift tax return or reduce your lifetime gift/estate tax exemption.

If you’re married and gift with your spouse (known as “gift splitting”), together you could give up to $38,000 per recipient in 2025 without triggering gift tax consequences.

In short: before midnight on December 31, you have a last-minute opportunity to move up to$19,000 (or $38,000 if married) to each loved one — tax-free.

Why Year-End Giving Matters

• Maximizing your 2025 exclusion: If you don’t use the full $19,000 per     person before December 31, you lose that “tax-free window” for the year.     Waiting until January means starting fresh under the 2026 exclusion (which     — at least for now — remains $19,000, but there is no guarantee it won’t     be adjusted).
• Estate- and legacy-planning benefits: Gifting during life reduces the size of     your taxable estate, which can help preserve wealth for future generations     — especially relevant if your estate approaches the lifetime exemption     threshold.
• Emotion & relationships: Year-end often coincides with holidays     and family gatherings — a meaningful moment to give, gift, or support     loved ones.

Beyond Cash: How to Give “Unlimited” Amounts — Medical and Tuition Gifts

While the $19,000annual limit applies broadly to most gifts, there’s a powerful exception under federal tax law for certain kinds of payments.

Under Internal Revenue Code § 2503(e) (often called the “Med–Ed exclusion”), payments made directly toa medical care provider or an educational institution on behalf of someone else do not count as taxable gifts at all.

That means:

• If you pay someone’s medical bills or     insurance premiums directly to the hospital, doctor, or insurance company     — and not give the money to the person — that payment is excluded from     gift tax.
• If you pay tuition directly to a     qualifying school on behalf of a child or grandchild, that’s also excluded     — even if the amount is large.

Important caveats:

• The payment must go directly to the     institution or provider, not to the individual.
• For tuition: the exclusion generally only     applies to tuition itself — it does not cover room and board, supplies, dorm costs, or other ancillary expenses.
• For medical: the costs must qualify under     the IRS definition of “medical care” (treatment, diagnosis, cure, prevention, etc.), and the payment must not be reimbursed by insurance.

Because those payments are excluded from the gift tax rules, you can — in effect — give “unlimited” support through tuition or medical payments, without eating into your $19,000annual limit or your lifetime estate/gift exemption.

To discuss your year-end giving strategy, contact Howell Legacy Planning for a free personalized consultation.

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