On November 5, 2026 the IRS published its inflation adjustments for 2027, and two of them govern gifts. For gifts made in 2027, the first $20,000 given to any one person is not counted as a taxable gift, up from $19,000 in 2025 and 2026. The basic exclusion amount, the lifetime total that shelters larger gifts and an estate from federal estate and gift tax, is $15,480,000 for a death in 2027, up from $15,000,000. Both figures are federal, and both are reset each autumn.
Two numbers, two different jobs
The annual exclusion is a counting rule. A gift of $20,000 or less to one person in 2027 is not a taxable gift and needs no return, as long as the person can use it now. It applies per recipient and per giver: a parent with three children can give $60,000 and file nothing, and a married couple giving from money each of them owns can give $40,000 to each child. The figure is rounded down to the nearest $1,000, which is why it sat at $19,000 for two years.
The basic exclusion amount is a running total. Gifts above the annual exclusion are reported, added up over a lifetime and combined with the estate at death. Only when that total passes $15,480,000 does any federal tax fall due, at 40 percent of the excess. The $15,000,000 starting figure was written into the tax code by the One Big Beautiful Bill Act in 2025, indexed after 2026 and rounded to the nearest $10,000. The federal estate tax is for the wealthy; probate has no threshold at all, as the estate planning guide explains.
| Federal figure | 2026 | 2027 |
|---|---|---|
| Annual exclusion, per recipient | $19,000 | $20,000 |
| Basic exclusion amount (estate and lifetime gifts) | $15,000,000 | $15,480,000 |
| Top estate and gift tax rate | 40 percent | 40 percent |
A $50,000 gift to a daughter, worked through
A parent gives a daughter $50,000 in 2027 toward a down payment. The first $20,000 is excluded. The other $30,000 is a taxable gift, which means two things and only two. The parent files Form 709 by April 15, 2028, or the next business day, reporting the $30,000, and the $30,000 comes off the parent's lifetime exclusion, leaving $15,450,000. Tax due: $0. The daughter files nothing and owes nothing, because federal law excludes gifts from the recipient's gross income.
If both parents give, $40,000 is excluded and $10,000 is reported. If the money all sits in one parent's account, the couple can elect on Form 709 to split the gift, which takes a return even when no tax results. Tuition paid straight to the college, or a medical bill paid straight to the provider, is not a gift at all under federal law, however large.
When a federal tax is actually owed
Only once lifetime taxable gifts plus the estate exceed the basic exclusion amount. Above the line the rate is 40 percent of the excess, so a $16,000,000 estate in 2027 with no earlier taxable gifts owes $208,000. A married couple can shelter twice the amount, but only if the executor of the first spouse to die files an estate tax return and elects to pass the unused exclusion to the survivor, even when nothing is owed. The election cannot be made on a late return.
The state answer is different
The federal line is $15,480,000. Several states tax estates far below it, and a few tax what an heir receives instead. Oregon requires an estate transfer tax return when the estate is $1 million or more. Washington's exclusion is $3,000,000 for deaths on or after July 1, 2026. Pennsylvania has no threshold: it taxes an inheritance at 4.5 percent for children and other direct descendants, 12 percent for siblings and 15 percent for anyone else, with transfers to a spouse at 0 percent. Which rule applies turns on the state where the person who died lived, and the state revenue department, not the federal release, publishes the figure.
The gift the IRS ignores and Medicaid does not
The annual exclusion is a tax rule. Medicaid has its own for nursing home coverage: when someone applies, the state looks back 60 months for anything given away for less than fair market value, and a gift inside that window produces a period of ineligibility. A $20,000 gift that needs no IRS form in 2027 can still cost months of coverage in 2030, and how the penalty is computed varies by state. The long-term care guide walks through the look-back and the penalty arithmetic.
What to do with the new figures
- A gift of $20,000 or less per person in 2027 needs no paperwork. Above that, Form 709 is due the following April, and the tax is almost always $0.
- Help with school or medical costs by paying the institution directly.
- Check the state where you live and where an heir lives, and if nursing home care could come within five years, ask an elder law attorney what a gift does to Medicaid eligibility in your state before the money moves.