The 2026 Annual Exclusion Amount

Each year, the IRS lets you give a certain dollar amount to any individual without triggering gift tax or even needing to file a gift tax return. For 2026, the annual exclusion is approximately $19,000 per recipient.

That figure is per person, per recipient, as defined in IRC § 2503(b). A married couple can each give $19,000 to the same person, which means $38,000 to one individual without any paperwork. Give to ten people? That is $380,000 out of your estate with zero reporting.

One thing people miss: the annual exclusion resets every calendar year. If you gave $19,000 to your daughter on December 30 and another $19,000 on January 2, those are two separate tax years. Both gifts are fully excluded.

The Lifetime Exemption: $15M Permanent After OBBBA

The TCJA roughly doubled the lifetime gift and estate tax exemption in 2018. That increase was scheduled to expire on December 31, 2025, which would have dropped the exemption to roughly $7 million per person. OBBBA-2025 reversed that trajectory. Section 70411 amended IRC § 2010(c)(3) to set the basic exclusion at $15 million per individual for decedents dying and gifts made after December 31, 2025, indexed for inflation each year.

For a married couple, that is $30 million combined. The 40% top rate on amounts above the exemption is unchanged. For more on the estate tax side of the same exclusion, see our estate tax exemption guide.

The anti-clawback rule in T.D. 9884 remains on the books. If a future Congress lowers the exemption, gifts made under today’s higher exemption will not be clawed back.

Gift Splitting for Married Couples

Married couples have an option called gift splitting, where one spouse can make a gift and both spouses agree to treat it as if each gave half. This effectively doubles the annual exclusion for gifts made by one spouse, per IRC § 2513.

Say your wife writes a $38,000 check to your nephew. If you both elect gift splitting on Form 709, each of you is treated as having given $19,000 — right at the annual exclusion. No lifetime exemption used, no tax owed.

The downside: if either spouse makes any gift that requires splitting, both spouses must file a Form 709 for that year, even if the other spouse made no gifts at all.

When You Need to File Form 709

You are required to file a federal gift tax return (Form 709) whenever you give more than the annual exclusion to any single person in a calendar year. The form is due April 15 of the following year, and it extends with your income tax return if you file for an extension.

Situations that trigger Form 709 even when no tax is owed:

• Gifts above the annual exclusion — even if you are using lifetime exemption, the IRS needs to track the running total
• Gift splitting — both spouses must file if you elect to split any gift
• Gifts of future interests — contributions to certain trusts, even under $19,000, may not qualify for the annual exclusion
• Gifts to 529 plans using the 5-year election — more on this below

Missing a Form 709 does not trigger an immediate penalty in most cases, but it does leave the statute of limitations open indefinitely. That is a problem if the IRS later questions the value of a gift — especially for hard-to-value assets like business interests or real estate.

What Counts as a Gift (and What Doesn’t)

The definition is broader than most people think. A gift is not just handing someone a check. The IRS defines it as any transfer where you do not receive full value in return, per IRC § 2501. A few common situations that trip people up:

Below-market loans. If you lend money to a family member at zero interest or below the IRS applicable federal rate (AFR), the foregone interest is treated as a gift under IRC § 7872. On a $500,000 interest-free loan, the foregone interest can add up to a meaningful annual gift — enough to exceed the exclusion.

Paying someone’s bills. If you pay your adult child’s rent or credit card bill, that is a gift. However, paying their tuition directly to the educational institution is not — it qualifies for an unlimited exclusion under IRC § 2503(e). Same goes for paying medical bills directly to the provider. The key word is “directly.” Give your kid money and tell them to pay their tuition, and you have just made a regular gift.

Adding someone to a bank account or property title. If you add your child to a joint bank account and they withdraw money, or you add them to the deed of your house, you may have made a gift of the value transferred. People do this for estate planning convenience without realizing the gift tax implications.

529 Superfunding: The 5-Year Election

One of the more useful gifting tools for families with children or grandchildren: you can contribute up to five years’ worth of annual exclusions to a 529 education savings plan in a single year, under IRC § 529(c)(2)(B). With a $19,000 exclusion, that is up to $95,000 per beneficiary in one shot (or $190,000 if both spouses contribute).

You will need to report this on Form 709 and elect to spread the gift over five years. If you die during the five-year period, the portion allocated to years after your death gets pulled back into your estate. And you cannot make additional annual exclusion gifts to the same beneficiary during that window.

For grandparents with the means to do it, superfunding 529s is one of the most efficient ways to move money out of your estate while also getting a concrete benefit — the funds grow tax-free for education expenses.

Gifts to Non-Citizen Spouses

Normally, gifts between spouses are entirely tax-free under the unlimited marital deduction (IRC § 2523). But that deduction does not apply when the recipient spouse is not a U.S. citizen. Instead, there is a separate, higher annual exclusion for gifts to non-citizen spouses — approximately $190,000 for 2025, indexed for 2026.

This catches people off guard, especially couples where one spouse has a green card but has not naturalized. The green card does not matter for gift tax purposes — citizenship is the test. If you are transferring significant assets between spouses and one is not a citizen, you need to track these numbers carefully.

Generation-Skipping Transfer Tax

Gifts to grandchildren (or anyone more than one generation below you) can trigger a separate layer of tax called the generation-skipping transfer tax (GSTT). The GSTT rate is 40% — the same as the estate tax — and it is designed to prevent families from skipping a generation of tax by giving directly to grandchildren.

The GST exemption tracks the lifetime gift/estate tax exemption amount. With OBBBA’s amendment, the GST exemption is also $15 million per person in 2026, indexed thereafter. Allocating GST exemption to dynasty trusts funded now means those trusts — and all future growth inside them — are permanently GST-exempt.

Planning After OBBBA

The pressure to use the full exemption before a sunset is gone. The strategic case for targeted gifting remains. Estates well above the $15M exclusion still benefit from removing future appreciation. A gift today freezes the asset’s value at the date-of-gift number; future growth happens outside the estate.

Common strategies after OBBBA:

• Irrevocable trusts — spousal lifetime access trusts (SLATs), grantor retained annuity trusts (GRATs), and intentionally defective grantor trusts (IDGTs) all still serve the same growth-shifting and asset-protection goals
• Direct gifts to family members — simple, clean, and effective if you are comfortable giving up control
• Gifts of discounted assets — transferring minority interests in family LLCs or partnerships, which may qualify for valuation discounts, lets you move more value per dollar of exemption used

Talk to a CPA and an estate attorney together. These decisions involve tax, legal, and personal considerations that do not sit in one discipline. For how capital gains tax in California interacts with gifting, or how the alternative minimum tax may affect your planning, see our related guides. Our tax advisory team can walk you through the details.

Sources & References

• One Big Beautiful Bill Act, P.L. 119-21 (Congress.gov)
• 26 U.S.C. § 2010 — Unified Credit / Applicable Exclusion Amount (Cornell)
• 26 U.S.C. § 2501 — Imposition of Gift Tax (Cornell)
• 26 U.S.C. § 2503 — Taxable Gifts / Annual Exclusion (Cornell)
• 26 U.S.C. § 2513 — Gift Splitting (Cornell)
• 26 U.S.C. § 2523 — Marital Deduction for Gifts (Cornell)
• 26 U.S.C. § 2601 — Generation-Skipping Transfer Tax (Cornell)
• 26 U.S.C. § 7872 — Below-Market Loans (Cornell)
• IRS — About Form 709, Gift Tax Return
• Treasury T.D. 9884 — Anti-Clawback Final Regulations (Federal Register)