Three Separate Federal Transfer Taxes
Three federal taxes apply to transfers of assets. The gift tax applies to transfers during life, the estate tax applies to transfers at death, and the generation-skipping transfer tax applies to certain transfers during life or at death to skip persons.
Gift Tax
A gift is a transfer of property to the extent that the recipient (donee) pays less than fair market value. The annual exclusion generally applies to gifts of present interests. For 2027, the annual gift-tax exclusion is $20,000 per recipient, up from $19,000 in 2026. The annual gift-tax exclusion in prior years was as follows.
- 2025–2026: $19,000
- 2024: $18,000
- 2023: $17,000
- 2022: $16,000
- 2018–2021: $15,000
- 2013–2017: $14,000
- 2009–2012: $13,000
- 2006–2008: $12,000
- 2002–2005: $11,000
- 1997–2001: $10,000
The special annual exclusion for qualifying gifts to a spouse who is not a U.S. citizen is $194,000 in 2026 and $201,000 in 2027. See the 2026 and 2027 IRS revenue procedures.
There is no gift tax on gifts that qualify for the (a) marital deduction or (b) charitable deduction. In addition, no out-of-pocket gift tax has to be paid until a donor's cumulative taxable gifts exceed the "applicable exclusion" (explained below) that is available for gift and estate tax purposes. After the applicable exclusion amount has been exceeded, the federal gift tax rate is 40%. The gift tax is generally paid by the donor out of assets not involved in the gift, so the amount of the tax paid is not included in the amount taxed.
Estate Tax
Upon death, the decedent's gross estate includes the then-current fair market value of all property interests held by the decedent at the time of his or her death, whether passing by operation of law (such as joint tenancy assets), by operation of contract (such as insurance proceeds), or by operation of probate laws. There are deductions for debts, administrative expenses, qualified transfers to spouses, and transfers to qualified charities. The net amount is the taxable estate. To the extent the applicable exclusion has not been used for lifetime gifts, it will be applied to the taxable estate. The estate tax is paid out of the taxable assets, so the amount of the estate tax itself is actually included in the computation of the tax.
Applicable Exclusion
The basic exclusion amount for 2027 is $15,480,000, up from $15,000,000 for 2026 and $13,990,000 for 2025. The exclusion is applied first to taxable lifetime gifts. The amount remaining at death is available for the estate tax. An eligible surviving spouse may also have a deceased spousal unused exclusion amount, as explained below.
| Year | Basic Exclusion Amount | Lowest Gift Tax Rate (after exclusion) | Lowest Estate Tax Rate (after exclusion) | Highest Tax Rate | |
|---|---|---|---|---|---|
| Gift Tax | Estate Tax | ||||
| 2027§§ | $15,480,000 | $15,480,000 | 40% | 40% | 40% |
| 2026§ | $15,000,000 | $15,000,000 | 40% | 40% | 40% |
| 2025ǂ | $13,990,000 | $13,990,000 | 40% | 40% | 40% |
| 2024 | $13,610,000 | $13,610,000 | 40% | 40% | 40% |
| 2023^ | $12,920,000 | $12,920,000 | 40% | 40% | 40% |
| 2022## | $12,060,000 | $12,060,000 | 40% | 40% | 40% |
| 2021++ | $11,700,000 | $11,700,000 | 40% | 40% | 40% |
| 2020+ | $11,580,000 | $11,580,000 | 40% | 40% | 40% |
| 2019# | $11,400,000 | $11,400,000 | 40% | 40% | 40% |
| 2018‡ | $11,180,000 | $11,180,000 | 40% | 40% | 40% |
| 2017† | $5,490,000 | $5,490,000 | 40% | 40% | 40% |
| 2016 | $5,450,000 | $5,450,000 | 40% | 40% | 40% |
| 2015 | $5,430,000 | $5,430,000 | 40% | 40% | 40% |
| 2014 | $5,340,000 | $5,340,000 | 40% | 40% | 40% |
| 2013 | $5,250,000 | $5,250,000 | 40% | 40% | 40% |
| 2012 | $5,120,000 | $5,120,000 | 35% | 35% | 35% |
| 2011 | $5,000,000 | $5,000,000 | 35% | 35% | 35% |
| 2010* | $1,000,000 | $5,000,000 | 35% | 35% | 35% |
| 2009 | $1,000,000 | $3,500,000 | 41% | 45% | 45% |
| 2008 | $1,000,000 | $2,000,000 | 41% | 45% | 45% |
| 2007 | $1,000,000 | $2,000,000 | 41% | 45% | 45% |
| 2006 | $1,000,000 | $2,000,000 | 41% | 45% | 46% |
| 2005 | $1,000,000 | $1,500,000 | 41% | 45% | 47% |
| 2004 | $1,000,000 | $1,500,000 | 41% | 45% | 48% |
| 2003 | $1,000,000 | $1,000,000 | 41% | 41% | 49% |
| 2002 | $1,000,000 | $1,000,000 | 41% | 41% | 50% |
| 2001 | $675,000 | $675,000 | 39% | 39% | 55% |
§§ See Rev. Proc. 2026-35 for the 2027 figures.
§ See Rev. Proc. 2025-32 for the 2026 figures.
ǂ See Rev. Proc. 2024-40 for the 2025 figures.
^ See Rev. Proc. 2022-38 for the 2023 figures.
## See Rev. Proc. 2021-45 for the 2022 figures.
++ See Rev. Proc. 2020-45 for the 2021 figures.
+ See Rev. Proc. 2019-44 for the 2020 figures.
# See Rev. Proc. 2018-57 for the 2019 figures.
‡ See Rev. Proc. 2018-18 for the 2018 figures.
† See Rev. Proc. 2016-55 for the 2017 figures.
The basic exclusion amount was generally indexed for inflation after 2011. For 2018 and later, the chained consumer price index is used for cost-of-living adjustments. Under the "portability" rules, the "applicable exclusion" for the federal estate tax may also include the deceased spousal unused exclusion (DSUE) amount if the appropriate election is made on the estate tax return of the predeceased spouse.
*The table shows the default estate-tax rules for 2010. An executor could elect out of the federal estate tax and use modified carryover basis instead. See the IRS guidance for executors and the 2010 Form 709 instructions.
Generation-Skipping Transfer Tax
The generation-skipping transfer tax (GSTT) applies to transfers to "skip persons", whether made during life or at death. "Skip persons" generally include grandchildren, more remote descendants, and certain unrelated persons in younger generations. The GSTT can apply in addition to gift or estate tax. Its rate equals the highest federal estate tax rate (40% in 2026 and 2027) multiplied by the inclusion ratio. Estate taxes paid are deducted before computing the GSTT. Each donor or decedent has a GST exemption equal to the federal basic exclusion amount: $15,000,000 in 2026 and $15,480,000 in 2027. The exemption can be used for transfers during life or at death. The GST exemption applies to the transferor (donor or decedent) regardless of the number of skip persons to whom the transfers are made. The GST exemption is not "portable" from the spouse who dies first to the surviving spouse.
Portable Applicable Exclusion for Spouses
Under the 2010 Tax Relief Act, a credit-shelter trust is not required to preserve the applicable exclusion that was not used by the predeceased spouse. The unused applicable exclusion can apply to the surviving spouse's estate. Even so, because the credit-shelter trust provides asset protection and because remarriage can eliminate the ability to use the prior spouse's credit, it is usually advisable to use a credit-shelter trust.