The 2026 Estate and Gift Exemption Is $15 Million

For years, business owners planned around a deadline: the higher federal estate and gift exemption was scheduled to drop after 2025. That deadline is gone. The federal basic exclusion amount is $15 million for 2026 and will be adjusted for inflation in later years. With the pressure removed, year-end planning shifts from racing a sunset to using each year's exclusions well.

The 2026 Numbers

The IRS What's New page for estate and gift tax confirms that Public Law 119-21, signed July 4, 2025, amended Section 2010(c)(3) to set the basic exclusion amount at $15,000,000 for calendar year 2026, up from $13,990,000 for 2025. Revenue Procedure 2025-32 provides the other key 2026 figures:

• Generation-skipping transfer exemption: $15,000,000.
• Annual gift exclusion: the first $19,000 of gifts of present interests to each person.
• Gifts to a spouse who is not a U.S. citizen: the first $194,000.

The revenue procedure states that the basic exclusion amount will be adjusted for inflation for 2027 and later years. A married couple can, with proper planning and elections, use two exclusions.

Why Business Owners Should Still Plan

A $15 million exemption sounds large until you add the value of an operating business, commercial real estate, retirement accounts, and life insurance. Many owners of growing companies will cross that line over time. Planning also matters below the line, because how and when ownership passes affects income tax basis, control, and family harmony.

Year-End Moves to Review Before December 31

Use the $19,000 annual exclusion. The exclusion is per recipient, per year, and does not carry forward. A gift must be complete by December 31, 2026 to count for 2026. A parent with three children and three grandchildren can give each of them $19,000, or $114,000 in total, without using any lifetime exemption. Gifts of cash should clear, and gifts of securities should be transferred, before year-end.

Consider gifts of business interests. Transferring minority, nonvoting interests in an LLC or S corporation can move future growth out of your estate. These gifts require a qualified appraisal, attention to S corporation eligibility rules for any trust that receives shares, and an operating or shareholder agreement that supports the transfer.

Report what needs reporting. Gifts above the annual exclusion, and gifts a married couple elects to split, are reported on Form 709. The IRS now accepts Form 709 through its Modernized e-File system. Filing also starts the clock on how long the IRS has to question a gift's value, which is a reason to report hard-to-value gifts with adequate disclosure.

Think about basis. Assets given during life generally keep the giver's tax basis, while many assets received at death receive a new basis. For appreciated property, especially low-basis real estate, holding until death may save more income tax than an early gift saves in estate tax. This tradeoff is often the deciding factor for owners well below the exemption.

Coordinate with income tax planning. Gifting income-producing interests to family members in lower brackets can reduce the family's overall income tax, but the rules for minors and the assignment of income doctrine limit what works. We model these effects alongside your 2026 year-end tax plan.

California Considerations

California residents should pay close attention to how property passes. Real estate reassessment rules, community property treatment for married couples, and the way trusts are drafted can all change the result for California families. Those questions are legal as much as tax questions.

Legal Documents Belong With an Estate Attorney

SMB CPA Group handles the tax side of estate and gift planning: coordinating valuations, gift tax returns, income tax projections, and the numbers behind each option. Wills, trusts, buy-sell agreements, powers of attorney, and the transfer documents themselves should be drafted and reviewed by a licensed estate planning attorney. We are glad to work alongside your attorney so the documents and the tax filings match.

Key Takeaways

• The 2026 federal basic exclusion and GST exemption are each $15,000,000, adjusted for inflation starting in 2027.
• The 2026 annual gift exclusion is $19,000 per recipient, and $194,000 for gifts to a non-citizen spouse.
• Annual exclusion gifts must be complete by December 31 and do not carry forward.
• Weigh lifetime gifts against the basis step-up at death, especially for appreciated property.
• Have an estate attorney draft and review all legal documents.

If you want to map your year-end gifts and the tax effect of transferring business interests, schedule a consultation with SMB CPA Group, or contact us with your questions.

Disclaimer: The information presented on this website or any SMB CPA Group, PC online platform is for general information and illustrative purposes only. It should not be considered tax, legal, financial, or other professional advice, and it is not a substitute for advice from a licensed professional who knows your circumstances.