In addition, the estate and gift tax exemption will be $15.48 million per individual for 2027 gifts and deaths, up from $15 million in 2026.
This increase means that a married couple can shield a total of $30.96 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 $960,000 starting in 2027.
ANNUAL GIFT TAX EXCLUSION
Each year, the IRS sets the annual gift tax exclusion, which allows a taxpayer to give a certain amount tax free ($20,000 in 2027) per recipient without depleting any of the taxpayer’s lifetime gift and estate tax exemption ($15.48 million in 2027). For married couples, this means that $40,000 can be given per year per recipient beginning next year.
For example, if a married couple has three children and five grandchildren, they may transfer $320,000 to their descendants without touching their combined $30.96 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 ($30.96 million in 2027) 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, as 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 2027, the first $201,000 of gifts to a spouse who is a non-US citizen is 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 ($20,000 in 2027 or $40,000 if the gift is split with a spouse), a portion of the individual’s lifetime gift tax exemption ($15.48 million in 2027) will be used. Since the gift tax and estate tax exemptions are linked, using the gift tax exemption reduces the amount one may leave estate tax free at death.
If an individual exceeds the annual gift tax exclusion, a gift tax return will be due on or before April 15 of the following year to report the gift (and track the amount of lifetime exemption that has been used).
