Gift Tax Rules & the Lifetime Estate Exemption (2026)

The giver, not the recipient, is responsible for any federal gift tax. Recipients do not report gifts as income. They take over the giver's cost basis for gifted property, which matters later when they sell (unlike inherited assets, which receive a step-up in basis).

The 2025 tax law set the exemption at $15 million from 2026, indexed for inflation, removing the previously scheduled drop to about $7 million.

• Gifts to your US-citizen spouse, of any amount.
• Tuition paid directly to a school (not books or housing).
• Medical expenses paid directly to the provider.
• Gifts to qualified charities and political organizations.

File Form 709 by April 15 of the following year if you give any one person more than $19,000 in 2026 (other than excluded gifts), if you and your spouse elect gift splitting, or if you give a future interest such as certain trust gifts. Filing does not mean paying: the excess simply reduces your $15 million lifetime exemption. Tax is owed only after the exemption is used up.

Helen gives her daughter $60,000 toward a home in 2026 and pays $25,000 directly to her grandson's university.

• Tuition: fully excluded, no reporting needed.
• Down payment: $60,000 − $19,000 exclusion = $41,000 taxable gift.
• Helen files Form 709 and her remaining exemption falls to $14,959,000.
• No tax is due. If her husband agrees to gift splitting, only $22,000 counts against their exemptions.

• Annual exclusion gifting: a couple with three children and their spouses can give $228,000 a year without touching the exemption.
• Funding 529 plans with five years of exclusions at once ($95,000 per beneficiary, $190,000 per couple).
• Giving appreciated stock to family members in the 0% capital gains bracket.
• Keeping highly appreciated assets until death so heirs get a stepped-up basis.

About a dozen states plus DC levy their own estate tax with much lower exemptions; Massachusetts and Oregon start at $2 million and $1 million respectively. Six states, including Pennsylvania and New Jersey, levy an inheritance tax paid by some heirs. Connecticut is the only state with its own gift tax. See the IRS gift tax page for federal rules and consult an estate attorney for state planning.