The IRS raised the annual gift exclusion to $20,000 per recipient for 2027, up from $19,000 in 2026, according to Revenue Procedure 2026-35 released November 5. A married couple with four married children can now move $320,000 out of their estate every January 1 with no gift tax return required.
By The Numbers
The annual exclusion rises to $20,000 per giver, per recipient. Married couples who elect to gift-split can give $40,000 to each recipient without touching their lifetime exemption. The federal estate and gift tax exemption climbs to $15.48 million per individual, or $30.96 million for a married couple using portability, up from $15 million and $30 million respectively in 2026. These figures take effect January 1, 2027.
How The $320,000 Transfer Works
Gift-splitting allows each spouse to be treated as making half the gift. In the illustrative case, the husband gives $20,000 to each of the four children and their four spouses — eight recipients totaling $160,000. The wife does the same from her own funds, adding another $160,000. The combined $320,000 moves out of the estate on a single day with no Form 709 filing, because each individual gift stays within the $20,000 annual exclusion under Internal Revenue Code Section 2503(b)(1). Under Section 6019, gifts that remain within the exclusion trigger no return requirement.
The Bottom Line On Estate Tax Savings
The figure that matters for high-net-worth families is the 40% federal estate tax rate. On a $36 million estate — roughly $5 million above the couple’s $30.96 million combined exemption — each year of $320,000 in gifts reduces the eventual tax bill by $128,000. Over a decade, $3.2 million in transfers saves approximately $1.28 million in estate tax. Critically, any future appreciation on those gifted assets also escapes the taxable estate.
Lifetime Exemption Headroom Grows
Investors will note the lifetime exemption increase adds $480,000 per individual, or $960,000 per couple, in additional transfer capacity. For families who have already maxed out prior giving, this reopens the spigot for another $960,000 in tax-free lifetime gifts starting in 2027. The unified credit means every dollar used during life reduces the estate tax exemption at death dollar for dollar.
Present Interest Requirement And Trust Planning
The annual exclusion applies only to gifts of present interests, not future interests. This restriction drives the use of Crummey trusts, which give beneficiaries a temporary withdrawal window — typically 30 days — to convert a trust gift into a present interest qualifying for the exclusion. The mechanism allows gifts to minors or trusts to capture the $20,000 per recipient exclusion while maintaining control over ultimate distribution.
State Taxes And Basis Considerations
Some states impose separate estate or inheritance taxes with thresholds well below the federal $15.48 million exemption. Families should review their state rules before relying solely on federal planning. Additionally, recipients receive the donor’s carryover basis in appreciated assets. Gifting low-basis, high-growth property shifts future capital gains to the recipient’s potentially lower tax bracket, while gifting declining assets can waste a valuable tax loss.
What Comes Next
The 2027 figures are final and take effect January 1. The IRS will announce 2028 inflation adjustments in the fall of 2027.
Sources
- The IRS Raised the Annual Gift Exclusion to $20,000 for 2027. A Couple With Four Married Children Can Move $320,000 Out of the Estate Every January 1 With No Form and No Tax
- Crummey trust
- IRS Announces Increased Gift and Estate Tax Exemption Amounts for 2027
- Annual Gift and Estate Tax Exemptions Increase In 2027
- The IRS Raised the Annual Gift Exclusion to $20,000 for 2027. A Couple With Four Married Children Can Move $320,000 Out of the Estate Every January 1 With No Form and No Tax
- Wrapping Up Tax-Favored Gifts at Year-End
Photo: Carol M. Highsmith (Public domain)
