How much can I transfer free of gift and estate tax in 2026?
Generally available; results depend on growth and basis
For 2026, the basic exclusion amount under IRC §2010(c)(3), as amended by the One Big Beautiful Bill Act (P.L. 119-21), is $15,000,000 per U.S. citizen or domiciliary, indexed for inflation after 2026. It covers taxable lifetime gifts and your estate together. Gifting appreciating assets removes future growth from your estate, but recipients take your basis instead of a step-up.
Reviewed by Ebot Mbi, CPA, EA · Last reviewed · Law and figures current as of September 17, 2026
Key takeaways
- 2026 basic exclusion amount: $15,000,000 per person; a married couple can shelter up to $30,000,000 with portability or planning.
- The law has no scheduled sunset, but Congress can change it.
- Taxable gifts use exemption first; the estate gets whatever is left.
- Gifted assets remove future growth from the estate but carry your basis (§1015).
- Large gifts need qualified appraisals and a Form 709 with adequate disclosure.
What it is
The federal gift and estate taxes are unified: one exemption, the basic exclusion amount, covers taxable gifts made during life and property passing at death. Tax at 40% applies only to the amount above your remaining exemption.
Using exemption during life can reduce estate tax because the growth on gifted assets after the gift is not in your estate. It also has costs: you give up the assets, and the recipient takes your income tax basis.
The rate is flat in practice for large estates: the estate and gift tax rate schedule in §2001(c) reaches 40% on amounts over $1,000,000, and because the exemption covers the first $15,000,000, every taxable dollar above the exemption is taxed at 40%.
What the law says
IRC §2010(c)(3)(A), as amended by P.L. 119-21 (signed July 4, 2025), sets the basic exclusion amount at $15,000,000, indexed for inflation for years after 2026. IRS guidance confirms that estates of decedents dying in 2026 have a basic exclusion amount of $15,000,000. The applicable exclusion amount is the basic exclusion amount plus, for a surviving spouse, any deceased spousal unused exclusion (DSUE) amount under §2010(c)(2).
Estate tax is computed on the taxable estate plus adjusted taxable gifts, less gift tax payable on those gifts (§2001(b)). Treas. Reg. §20.2010-1(c) provides that if the exclusion amount at death is lower than the amount used for gifts, the estate's credit is based on the higher amount, subject to exceptions.
Nonresidents who are not U.S. citizens have a much smaller estate tax exemption and different rules.
Requirements and tests
Gifts to a spouse who is a U.S. citizen qualify for the unlimited marital deduction and do not use exemption, but they also do not remove assets from the couple's combined estate. Gifts to charity qualify for the charitable deduction. The planning question is usually how much to give to children or trusts for them, and which assets to use.
Gifts of hard-to-value assets should be supported by appraisals meeting the qualified appraisal standards in the Form 709 instructions and Treas. Reg. §301.6501(c)-1(f), so the three-year period for the IRS to challenge the value begins to run.
- The gift is complete: you keep no control that would cause inclusion under §§2036–2038.
- Each non-cash gift is valued by a qualified appraiser.
- A timely Form 709 reports each taxable gift with adequate disclosure to start the statute of limitations.
- Married couples plan how to use both exemptions: through portability, credit shelter trusts, or gifts from each spouse.
How it works
You transfer assets expected to appreciate, often to an irrevocable trust. The gift's value at the transfer date uses exemption. Growth after the gift is outside your estate. At death, your estate uses whatever exemption remains, and the estate tax computation adds back your adjusted taxable gifts.
Because recipients take your basis, the estate tax saved on growth has to be compared with the capital gain tax the recipients may owe when they sell. Assets you keep until death generally get a basis equal to fair market value under §1014.
Married couples should coordinate. If one spouse holds most of the assets, gifts from that spouse can be split with the other under §2513, or the other spouse can make gifts of his or her own property. At the first death, a portability election can preserve the deceased spouse's unused exemption for the survivor.
Assets with high expected growth and relatively high basis, such as a new business interest or recently purchased investments, often make better gifts than long-held, low-basis assets, because the capital gain cost of losing a step-up is smaller.
Assumptions: Unmarried donor; gift in 2026 of assets worth $5,000,000 with a $5,000,000 basis; the assets grow to $10,000,000 by death.; Other assets at death: $15,000,000. Basic exclusion amount at death assumed to be $15,000,000 (the actual amount will be indexed for inflation).; Estate tax at 40% on amounts above the exemption. No gift tax is paid because the gift is within the exemption.; Capital gain line assumes the recipient sells at $10,000,000 and pays 20% plus 3.8% NIIT.
| Hold: estate of $25,000,000; tax 40% × $10,000,000 | $4,000,000 |
|---|---|
| Give: estate $15,000,000 + adjusted taxable gift $5,000,000; tax 40% × $5,000,000 | $2,000,000 |
| Estate tax difference | $2,000,000 |
| Recipient's capital gain tax on sale (23.8% × $5,000,000), with no step-up | $1,190,000 |
| Net difference if the recipient sells | $810,000 |
At these assumptions, the gift reduces estate tax by $2,000,000, but lost basis step-up can cost $1,190,000 if the recipient sells, so the net benefit is about $810,000.
Illustration only; not a projection of your results.
Risks and IRS scrutiny
Risks include undervalued gifts, incomplete gifts that are pulled back into the estate, loss of basis step-up, reduced personal liquidity, and future legislative change. The IRS reviews adjusted taxable gifts in estate tax examinations.
Making a large gift also reduces your own flexibility. Before you give, confirm that the assets you keep will cover your living expenses, including long-term care, for the rest of your life.
Who it is not for
This is not for estates comfortably under $15,000,000 (Texas has no state estate tax), for anyone who may need the assets, or for low-basis assets that the family is likely to sell, where keeping them for a step-up may cost less overall.
How ebotCPA helps
We map your estate against the exemption, model which assets to give and which to keep for a basis step-up, coordinate appraisals, and prepare Form 709. We coordinate with your attorney, who drafts the legal documents.
Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.
We coordinate with your attorney, who drafts the legal documents.
Frequently asked questions
What is the federal estate tax exemption for 2026?
$15,000,000 per person under IRC §2010(c)(3), as amended by P.L. 119-21, indexed for inflation after 2026.
Is the $15 million exemption permanent?
The law has no scheduled expiration date, but Congress can change it at any time.
Do lifetime gifts reduce my estate tax exemption?
Yes. Taxable gifts above the annual exclusion use the same exemption, and they are added back as adjusted taxable gifts when the estate tax is computed.
Does Texas have an estate tax?
No. Texas has no state estate or inheritance tax, so only the federal rules apply to Texas residents.
Have facts like these?
Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.