IRS Announces Increased Gift and Estate Tax Exemption Amounts for 2026

The US Internal Revenue Service (IRS) has announced that the annual gift tax exclusion will remain at $19,000 per recipient in 2026, the same as in 2025. The annual amount that may be given to a spouse who is not a US citizen will increase to $194,000 in 2026. In addition, the estate and gift tax exemption will be $15 million per individual for 2026 gifts and deaths, up from $13.99 million in 2025. This increase means that a married couple can shield a total of $30 million without paying any federal estate or gift tax. For a couple that has already reached their lifetime gift limit, this means that they may now give away an additional $2.02 million starting in 2026.

ANNUAL GIFT TAX EXCLUSION

Each year, the IRS sets the annual gift tax exclusion, which allows a taxpayer to give a certain amount (in 2026, this remains the same as in 2025, at $19,000) per recipient tax-free without using up any of the taxpayer’s lifetime gift and estate tax exemption ($15 million in 2026). For married couples, this means that they can continue in 2026 to give $38,000 per recipient per year.

For example, if a married couple has three children and five grandchildren, they may transfer $304,000 in 2026 to their descendants without touching their combined $30 million gift tax exemption, thus allowing them to transfer further substantial assets gift tax-free. Not only are the assets removed from the taxpayers’ taxable estates, but the assets’ future appreciation also avoids gift and estate taxes.

GIFTS TO NON-US CITIZEN SPOUSE

Generally, spouses who are both US citizens may transfer unlimited amounts to each other without incurring any gift tax, as any assets exceeding the couple’s combined estate tax exemption ($30 million in 2026) will be taxed at the death of the surviving spouse, and transferring assets to the survivor only defers the tax that the IRS will eventually collect.

Gifts to a non-US citizen spouse, however, are limited. Since a non-US citizen spouse may not be subject to the US estate tax, one cannot transfer unlimited assets to a non-US citizen spouse since that transferred wealth could potentially avoid US estate taxation upon the non-US citizen spouse’s death.

Thus, when the recipient spouse is not a US citizen, and regardless of whether the non-US citizen spouse is a resident or nonresident of the United States, the amount of tax-free gifts is limited to an annual exclusion amount.

For calendar year 2026, the first $194,000 of gifts to a spouse who is a non-US citizen are not included in the total amount of taxable gifts.

LIFETIME ESTATE AND GIFT TAX EXEMPTION

If an individual gifts an amount that is above the annual gift tax exclusion ($19,000 in 2026 or $38,000 if the gift is split with a spouse), a portion of the individual’s lifetime gift tax exemption ($15 million in 2026) will be used. The gift and estate tax exemption are linked, meaning that the use of one’s gift tax exemption will reduce the amount one may leave at death estate tax-free.

If an individual makes gifts exceeding the annual gift tax exclusion, a gift tax return will be due on or before April 15 of the year following the gift to report the gift (and track the amount of the lifetime exemption that has been used).

It should be noted that under the One Big Beautiful Bill Act (the Act), this new $15 million gift, estate, and generation-skipping exemption amount is now “permanent” but will continue to be indexed annually to inflation. Unlike prior legislation that had increased exemption amounts, the Act includes no sunset provisions, meaning that there is no need to rush to take advantage of the new, higher amount. However, because any provision of the Act could be amended or repealed at any time in the future, it may be prudent to consider making large gifts during the current administration to take advantage of the current high exemption levels and move assets, and their future appreciation, outside of one’s taxable estate.

Importantly, the Act has no bearing on the states that impose state-level estate taxes. Clients living in or owning property in one of the 12 states (and the District of Columbia) that impose state-level estate taxes should continue to plan for these taxes at death.