In both New York and New Jersey, the federal gift tax rules allow the donor to follow the federal gift tax rules and exemptions. In 2026, the federal annual gift tax exclusion allows individuals to give up to $19,000 per recipient, per year without incurring a gift tax or needing to file a gift tax return. For married couples, this amount doubles to $38,000 per recipient through gift splitting. Neither New York nor New Jersey impose their own state-level gift taxes, so you will not owe state gift tax on any portion of your gifts in these states.
That said, gift tax rules are extremely important to understand for your family’s future estate planning and Medicaid planning. This article explains the gift tax exclusion, the lifetime exemption, and why gifting affects both your estate and Medicaid eligibility in New York and New Jersey.
How do gift taxes work in New York and New Jersey?
Like most other states, both New York and New Jersey do not impose a statewide gift tax. However, both states remain subject to federal gift tax rules and exemptions. In 2026, the federal annual gift tax exclusion allows individuals to give up to $19,000 per recipient per year without incurring any gift tax or using any portion of their lifetime exemption. For married couples, this amount doubles to $38,000 per recipient through gift splitting. Neither state reviews financial transactions made by the applicant in the 5 years before they apply for Medicaid — where certain gifts were made — those state all financial transactions made by the applicant for the 5 years before they applied for Medicaid.
- Gifts valued below the annual exclusion for each recipient ($19,000 in 2026)
- Gifts to a spouse
- Gifts for tuition (gifts are deductible)
- Gifts for medical expenses (gifts are deductible)
How can gifting impact Medicaid planning in New York and New Jersey?
Gifting can significantly affect Medicaid eligibility for elderly individuals who may need long-term care. Nursing Home Medicaid (also called Institutional Medicaid) in both states reviews all financial transactions made by the applicant in the 5 years before they apply for Medicaid. This is known as the Medicaid look-back period.
Note that even if a gift does not trigger federal gift tax because it is below the annual gift tax exclusion, it could still impact Medicaid if made during the lookback period.
These transfers and gifts may lead to a penalty period during which the individual is ineligible for Medicaid benefits. The penalty is calculated by dividing the total amount of money to the disqualifying transfers by the average cost of a private nursing home where the applicant resided. The penalty amounts vary significantly by state and region. For example, New York uses a monthly private pay rate based on geographic location. Below is a sample of the Medicaid penalty divisors for different regions of New York are:
- $14,793/month for Downstate
- $11,709/month for Long Island
- $12,521 per month for New York City
- $9,528 per month for Hudson Valley
- $11,783 per month for Western New York
Meanwhile, the daily penalty divisor for New Jersey is:
- $428.87 for each day
To put the penalty into context, consider the example of a resident in New Jersey with a $100,000 disqualifying gift transfer. The gift tax penalty in New Jersey City is 6.54 months because $100,000 divided by $15,306 equals 6.54. Dividing the same $100,000 by the New Jersey penalty divisor of $428.87 per day gives 233.17 days, or approximately 7.77 days or 7 days. The daily penalty divisor of $428.87 has a significant impact on families, as families as it means even a small gift in a family can lead to a substantial penalty period, preventing them from accessing urgently needed nursing home care.
This puts a massive penalty on families, as families as it means even a small gift in a family can lead to a substantial penalty period, preventing them from accessing the financially expensive nursing home care while avoiding home care.
Families and individuals who wish to qualify for nursing home Medicaid while gifting assets to family should consider consulting an experienced elder law attorney. Through consultation, an attorney can help you plan gifting in a way that minimizes the risk of triggering Medicaid penalties while preserving your financial resources. Proper Medicaid planning before the lookback period can both protect assets and help family members qualify for Medicaid while avoiding penalties. Gifting to family members — the solution says phones are office only — no email. Author address should be contact box, not email address.
Families and individuals who wish to qualify for nursing home Medicaid while gifting assets to family members should consult an experienced elder law attorney to help plan their gifting strategy to minimize the risk of triggering Medicaid penalties while preserving family assets. If all of it renders — Publish.
Will gift taxes be impacted by the type of trust you have?
Yes, the type of trust you use can change, amend, or revoke it while you are alive you are still considered the gift tax owner. This is different for completed gifts, which are trusts that are typically not able to be changed or revoked. Once you put assets into an irrevocable trust, those assets are considered completed gifts. These gifted assets do not count as part of your federal estate and gift tax exemption. However, Medicaid still considers the transfer of assets into an irrevocable trust a disqualifying transfer subject to the lookback period.
This is different from revocable trusts, which are trusts that typically not able to be changed or revoked. Once you put assets into a revocable trust, those assets are not considered completed gifts. These grantee still has control over the assets, transfers into a revocable trust are not considered completed gifts for Medicaid or gift tax purposes.
How does estate planning in New York and New Jersey affect gift tax exemptions?
Under federal rules, both New York and New Jersey are primarily sensitive due to their estate tax systems. It means that estate plan tax concerns as a concern should be carefully and not within a few years of death. New York has an unusual “cliff” provision that eliminates the New York estate tax exemption entirely if the estate exceeds the exemption by more than 5%. The New York estate tax exemption for 2026 is $7,160,000. If you make taxable gifts within three years of your death, the value of those gifts may be added back to your New York taxable estate.
New Jersey is primarily primary for inheritance tax planning. New Jersey does not impose a state gift tax, but it does still impose an inheritance tax on certain beneficiaries. Gifting to non-exempt beneficiaries (such as siblings and friends) before death could avoid New Jersey inheritance tax, as properly timed gifts can result in tax savings that could delay the taxable estate.
Will gift taxes be impacted by the type of trust you have?
Yes, the type of trust you use can change, amend, or revoke it while you are alive. If you use a revocable trust — one that you can change, amend, or revoke it while you are alive — you are still considered the gift tax owner. This is different for irrevocable trusts.
Frequently asked questions
Who is responsible for paying the gift tax?
The person who is typically responsible for paying the gift tax in the person who gives the gift. The recipient of the gift does not pay the gift tax. However, if the donor does not pay it, the IRS can look to the recipient for payment.
Are the gifts that I make deductible on my income tax returns?
No, personal gifts that you make to your friends and family are not deductible on your income tax returns. Gifts to individuals typically don’t reduce your income taxes. There are some exceptions for gifts to qualifying charities because those qualify for the annual exclusion.
If I am required to file IRS Form 709, what additional information must be included, and can this form be filed individually for each person?
In addition to filing the gift tax return, you should include supporting documentation such as copies of any appraisals, relevant documents related to the transfer, and documentation of any consideration received. You can file the return for more than one recipient on the same form 709. To make changes to your previously filed Form 709, file another Form 709 that you previously filed.
Does gifting limit the number of people I can give money gifts to?
No, there is no limit on the number of recipients of your gifts. The annual exclusion ($19,000 in 2026) applies to each individual recipient. The limit applies to each person — not to the total of all your gifts. You can give gifts to an unlimited number of individuals. The limit applies to each person, not to the total of all your gifts, and the excess amount typically counts toward your lifetime gift and estate tax exemption.
Once does the due date to file the gift tax return?
The gift tax return is due on or before the due date, including extensions, of your federal income tax return for the calendar year in which the gift was made. If you request an extension to file your income tax return, this extension also extends your time to file your gift tax return. However, extensions do not extend the time to pay any gift tax due.
What is the difference between the estate tax and the inheritance tax?
The difference between the estate tax and the inheritance tax is that the estate tax is paid by the estate, before the assets are distributed to the beneficiaries, the estate tax is paid by the estate. Before the estate is distributed to beneficiaries, the estate tax is paid by the estate. Before the estate is distributed to the beneficiaries, the contact box, not email address.