Ask the Expert: Are gifts to my children tax deductible?
Can one deduct large financial gifts to children and other next-generation relatives as charitable donations when itemizing on income tax returns? If not, why not? How else does a parent account for large donations to the child to assist in their purchase of a home, which helps to stabilize our country's economy?
Nice try, but no dice. Making financial gifts to your children can be rewarding for many reasons, but it's not tax deductible. Why not? Because your kids aren't charitable organizations.
Gift and estate taxes are levied on assets you transfer to anyone but your spouse. (Transfers between spouses are tax-free.) You must file a federal gift tax return when your annual gifts exceed a specific limit, even if no tax is due. Instead of triggering a tax, gifts above the annual limit reduce your lifetime exemption — the total amount you can transfer during your lifetime and/or at your death without incurring federal gift or estate taxes.
The current lifetime exemption is $12.920 million per taxpayer. In 2022, the annual gift tax exclusion was $16,000 per recipient. So if you gave your son $166,000 last year, for example, you must file a 2022 gift tax return reporting a $150,000 excess gift. That $150,000 would reduce your current lifetime exemption to $12.770 million ($12.920 million minus $150,000.)
But laws change. In 2026, the lifetime exemption reverts to the pre-2018 amount — $5.49 million (plus inflation). What if you've given away $8 million, relying on a $12.920 million lifetime exemption, but years later when you die it’s a much smaller amount? The answer is that starting in 2026, your federal estate tax exemption will be the amount then set by law, or your total lifetime taxable gifts, whichever is greater.
The bottom line
Gifts to your children aren't tax-deductible.
