Lifetime Gifting in Texas: 2026 Gift Tax Limits and Smart Strategies

Giving money or property to your children and grandchildren while you are alive can be one of the simplest ways to help them and, for larger estates, to reduce a future estate tax. It also comes with rules: an annual limit, a lifetime limit, a tax return in some cases, and tax effects that are easy to overlook. Here is how lifetime gifting works for Texas families in 2026.

The Annual Exclusion

For 2026, each person can give up to $19,000 to any other person without using any of their lifetime exemption and without filing a gift tax return (IRS). There is no limit on the number of people you give to. A couple with three children and six grandchildren could give $38,000 to each of the nine, or $342,000 in a single year, with no gift tax return required as long as each gift comes equally from both spouses.

In Texas, gifts from community property are generally treated as made half by each spouse. Gifts from one spouse’s separate property may need a gift tax return to split them between spouses.

Unlimited Gifts for Tuition and Medical Care

Payments made directly to a school for tuition, or directly to a medical provider or insurer for someone’s care, are not taxable gifts at all (26 U.S.C. § 2503(e)). The payment must go to the institution, not to the child or grandchild. This is on top of the $19,000 annual exclusion.

529 Plans: Five Years at Once

A special rule lets you put up to five years of annual exclusion gifts into a 529 college savings plan in one year, up to $95,000 per beneficiary, or $190,000 for a married couple, by electing on a gift tax return to spread the gift over five years. Grandparents often use this to fund education early. See estate planning for grandparents.

Gifts Above the Annual Exclusion

Gifts above $19,000 to one person in a year are not taxed right away. They reduce your lifetime exemption, which is $15 million per person in 2026, and you report them on Form 709, due with your income tax return in April. Tax is only owed once your lifetime gifts exceed the exemption. Whatever exemption you use during life is not available at death.

Why Large Gifts Can Reduce Estate Tax

For families whose estates may be above the exemption, gifting moves future growth out of the estate. If you give a $2 million interest in a family business or rental portfolio today and it grows to $5 million, the $3 million of growth is never taxed in your estate. Gifts of interests in a family LLC may also qualify for valuation discounts. Large gifts are usually made to a trust, such as a dynasty trust or a spousal lifetime access trust, rather than outright. See our estate tax planning page.

Watch the Income Tax Side

A gift keeps your tax basis, while property inherited at death generally gets a new basis equal to its value. Giving away highly appreciated stock or real estate can leave the recipient with capital gains tax that inheritance would have avoided. For most families, the better gifts are cash or assets with little built-in gain, while appreciated assets are held until death. This is the main reason we usually advise against deeding your house to your kids. For married couples, see the community property double step-up.

Gifts to Minors and Young Adults

Giving large amounts outright to a minor or young adult has practical problems. Options include a custodial account under the Texas Uniform Transfers to Minors Act, a 529 plan, or a trust that holds the money until the child is older and protects it from creditors and divorce. A trust can also qualify gifts for the annual exclusion if it is drafted with the right withdrawal rights.

Frequently Asked Questions

Does the person receiving a gift pay tax on it?

No. The recipient does not pay income tax on a gift. If any gift tax were owed, it would be owed by the person giving the gift.

Do I need to file a gift tax return for a $25,000 gift to my son?

Generally yes, because it is above $19,000. No tax is usually owed; the return reports the use of part of your lifetime exemption. A married couple splitting the gift may stay within $38,000 but may still need returns if the money came from one spouse’s separate property.

Can I forgive a loan to my child as a gift?

Yes. Forgiving a loan is a gift of the amount forgiven, and you can forgive up to the annual exclusion each year.

Will the $15 million exemption change?

The current law sets it at $15 million for 2026, adjusted for inflation after that. Congress can change it in the future, which is one reason some families with large estates make gifts while the exemption is high.

Plan your gifts with us. Call (512) 737-8404 or book a free consultation.

Sources

• IRS: What’s New, Estate and Gift Tax
• IRS: Frequently Asked Questions on Gift Taxes
• 26 U.S.C. § 2503 (annual exclusion; tuition and medical payments)
• IRS: About Form 709

Written by Turner Henington, attorney and former KPMG tax accountant, Henington Lewis Law Firm PLLC. This article is general information, not legal or tax advice for your situation.