Gifting can be a powerful way to support loved ones while reducing your taxable estate. When you transfer assets to others during your lifetime, the value of those assets is removed from your estate when you die. As of 2025, the increased annual gift tax exclusion allows you to gift up to $19,000 per person per year without using any of your lifetime exemption or triggering gift tax.
However, there are additional opportunities to provide financial support above the annual exclusion amount without tapping into your lifetime gift tax exemption, and these strategies can still help reduce your taxable estate. Below are several types of transfers that the IRS does not treat as taxable gifts.
Medial Exclusion
Payments made directly to a medical provider or institution for someone’s medical care are not subject to gift tax. Qualifying medical expenses include costs related to:
- Diagnosis, cure, treatment, mitigation, or prevention of disease
- Procedures affecting any structure or function of the body
- Transportation essential to receiving medical care
- Medical insurance premiums
To qualify for the exclusion, you must pay the care provider or insurer directly rather than reimbursing the individual.
Educational Exclusion
Tuition payments made directly to a qualifying educational organization on behalf of an individual are also exempt from gift tax. A qualifying organization typically:
- Maintains a regular faculty and curriculum
- Has a regularly enrolled student body
- Conducts educational activities at a dedicated facility
Note that the exclusion applies only to tuition, not to books, supplies, room and board, or other related expenses.
Political Organizations
The IRS does not tax gifts to political organizations that primarily accept contributions or make expenditures for an exempt political function. This includes influencing (directly or indirectly):
- The selection, nomination, or election of individuals in public office
- The appointment of individuals to public office
- The election of Presidential or Vice-Presidential electors
Transfers for these political purposes fall entirely outside the gift tax system.
Certain Exempt Organizations
The IRS also excludes gifts made to certain types of tax-exempt organizations from gift tax, including those described here:
- IRC §501(c)(4): Civic leagues and social welfare organizations
- IRC §501(c)(5): Labor, agricultural, or horticultural organizations
- IRC §501(c)(6): Business leagues and similar organizations
To qualify, the organization must be exempt from tax under IRC §501(a) and the transfer must be for the organization’s use.
Start Maximizing Your Gifting Opportunities
The right gifting strategies can reduce your taxable estate and provide meaningful assistance to loved ones. Partner with Boulay’s trusted CPAs, attorneys, and financial advisors to ensure your plan aligns with IRS regulations and supports your long-term goals.
Contact us today to learn how Boulay’s estate and trust planning services can help protect your legacy and benefit the people who matter most.