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It is the Holiday Season and Time for Gifting

Written by Matthew J. Dorsey, Esq. on . Posted in Families Today.

It is the Holiday Season, and therefore time to consider gifting.  When you make a gift, there are a variety of legal considerations involved.  What follows is a series of questions and answers about what you should be thinking about when you make a gift.

Are there tax limits to the amount I can gift?

Every year, the IRS publishes the amount you can give to another person without the necessity of filing a federal gift tax return (an IRS Form 709).  In 2025, that amount is $19,000.  Usually, that amount increases from year to year, but in 2026 the annual exclusion amount will remain at $19,000.

Is it different if I am married?

Yes.  If you are married, you can combine your gift tax exclusion of $19,000 with your spouse’s exclusion and gift a total of $38,000 to any individual beneficiary.

Are gifts taxed?

If the gift you make is under the annual exclusion amount, then the gift is not subject to tax.  You, as the donor, do not pay tax, and neither does the recipient.  If the gift is above the annual exclusion amount, it is subject to the unified estate and gift tax exemption.

What is the unified exemption?

You can make gifts during your life and leave an estate at death without owing federal gift or estate tax, if your total lifetime giving and your estate when you die is valued at less than the unified estate and gift tax exemption.  That unified exemption for 2025 is $13.99 million and it goes up to $15 million in 2026.

Are any gifts not subject to gift tax?

Yes.  There are no federal gift taxes for: 1) gifts to your spouse, 2) tuition or medical expenses you pay directly to an institution for someone, and 3) gifts to a political organization for its use.

What about charitable gifts?

Charitable gifts may be deducted from the total amount of gifts made on your federal estate tax return.  It is important to remember that you do not need to file a federal estate tax return (an IRS Form 706), if your total lifetime gifting and your estate when you die is below the unified exemption amount.

Can I get income tax deductions?

If you make gifts to qualified, tax exempt charitable organizations, during the course of the year, you may be eligible to take deductions against your income.

How do the deductions work?

Generally speaking, you need to itemize your deductions on your income tax return and the deductions are limited to a certain percentage of your adjusted gross income (AGI).  If you do not itemize your deductions because you use the standard deduction, then you cannot take advantage of charitable deductions in 2025.  

Does that change in 2026?

Yes.  In 2026, the One Big Beautiful Bill Act created a new permanent charitable income tax deduction of $1,000 for individuals and $2,000 for married couples filing jointly.  These contributions must be made to a qualified operating charity, not a donor-advised fund or private foundation.

Do I need to keep records?

If you are making charitable donations, you should keep good records to substantiate them.  It is best to check with your accountant to see what is necessary.  Generally, you would want a copy of the check or credit card statement and a written acknowledgement from the recipient for any cash donations over $250.

Are there any State gift taxes?

There are no gift taxes payable to New York State.  If you reside in another state, you should check with your accountant.

Are there different rules for Medicaid?

Yes.  Gift tax rules and Medicaid rules are different.  If you would like to understand gifting in a Medicaid planning context, please check out my article on Medicaid rules for gifting from the October 10, 2025 Saratoga TODAY – https://saratogatodaynewspaper.com/october-10-october-16-2025-5/ 

It is wonderful to consider gifting, especially during Holiday Time.  To ensure you take advantage of available deductions and do not run afoul of any tax laws, it is advisable to speak to an experienced legal or tax professional.

I would like to take a moment to celebrate something we at O’Connell and Aronowitz are especially proud of this Holiday Season.  As of December 1, 2025, our law firm turned 100 years old!  We were started with two attorneys in Albany – Edward J. O’Connell and Samuel E. Aronowitz – on December 1, 1925.  Over the years, we have grown into a firm with over thirty lawyers that has become one of the area’s most trusted law firms.  We are happy to celebrate with our clients, family, and friends, and we look forward to the next 100 years!

Matthew J. Dorsey, Esq. is a Shareholder with O’Connell and Aronowitz, 1 Court Street, Saratoga Springs, NY. Over his twenty-eight years of practice, he has focused on the areas of elder law, estate planning, and estate administration. Mr. Dorsey can be reached at (518)584-5205, mdorsey@oalaw.com and www.oalaw.com.  

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