The federal government taxes gratuitous transfers through a unified estate and gift tax plus a separate generation-skipping transfer (GST) tax. The estate and gift taxes share a single lifetime exemption and a top marginal rate of 40%. The GST tax has its own, equal exemption. Understanding how the exemption, the annual exclusion, portability, and basis rules interact is the foundation of every tax-driven plan.
2026 figures — verify before relying
Transfer-tax figures change annually and by legislation. The amounts below reflect the One Big Beautiful Bill Act (OBBBA, 2025) and IRS Rev. Proc. inflation adjustments for 2026. Confirm current-year figures before advising.
| Item | 2026 amount |
|---|---|
| Estate & gift tax applicable exclusion (per individual) | $15,000,000 |
| GST tax exemption (per individual) | $15,000,000 |
| Top estate/gift/GST marginal rate | 40% |
| Annual gift tax exclusion (per donee) | $19,000 |
| Annual exclusion for gifts to a noncitizen spouse | $194,000 |
The OBBBA made the elevated exemption permanent at $15,000,000 per individual for 2026, indexed for inflation beginning in 2027, and eliminated the scheduled end-of-2025 TCJA sunset that would have dropped the exemption to roughly half. A married couple can therefore shelter $30,000,000 with proper planning. The 'anti-clawback' regulations continue to protect completed gifts made while the exemption was high.
- The $19,000 annual exclusion applies per donee, per year, only to gifts of a present interest. Gifts in trust need a Crummey withdrawal right or a 2503(c) structure to qualify.
- Married couples may elect gift-splitting on Form 709 to treat gifts as made one-half by each spouse, doubling the exclusion to $38,000 per donee.
- Direct payments of tuition (to the school) and medical expenses (to the provider) under IRC 2503(e) are unlimited and do not use exclusion or exemption.
Key takeaways
- For 2026 the estate/gift and GST exemptions are each $15,000,000, permanent under the OBBBA and indexed from 2027; top rate 40%.
- The annual exclusion is $19,000 per donee ($38,000 with gift-splitting); 2503(e) tuition/medical payments are unlimited.
- Portability captures DSUE but not the GST exemption and preserves a second step-up — weigh it against bypass-trust benefits.
- Under a large exemption, income-tax basis step-up planning often matters more than transfer-tax reduction.
Authorities
- One Big Beautiful Bill Act (2025) — Permanent $15M exemption; no TCJA sunset.
- IRC 2001, 2010, 2503, 2505, 2631, 1014, 1015
- Rev. Proc. 2022-32 — 5-year automatic portability election extension.
- IRS 2026 inflation adjustments (Rev. Proc.) — Annual exclusion $19,000.