By Jadene Tamura
The Internal Revenue Service has announced inflation adjustments for tax year 2026 and other tax changes (Rev. Proc. 2025-32).
Lifetime Exemption Amount
The lifetime exemption amount, which was temporarily doubled under the Tax Cuts and Jobs Act of 2017 (TCJA) and scheduled to return to its pre-TCJA levels after 2025, was “permanently” increased under the One Big Beautiful Bill Act (OBBBA) to $15 million per person (up from $13.99 million in 2025). This means a married couple can transfer a combined $30 million during life and/or at death without paying any federal gift or estate tax.
Annual Gift Exclusion
The annual gift exclusion amount remains at $19,000 per recipient per year. Cumulative gifts during the year to a recipient that do not exceed the annual gift exclusion amount are not reportable as taxable gifts. Gifts made in trust do not qualify for the annual gift exclusion unless the gift recipient has a present interest in the gift, such as a withdrawal power. If a taxpayer makes cumulative gifts to any one recipient in excess of the annual gift exclusion amount, all gifts to all recipients are to be reported on a gift tax return due on April 15 in the year following the year in which the gift was or gifts were made.
Annual Gift Exclusion for Non-U.S. Citizen Spouse
Gifts to a spouse typically qualify for the unlimited marital deduction and will not be subject to gift or estate tax; however, gifts to a spouse who is not a U.S. citizen (non-citizen spouse) do not qualify for the unlimited marital deduction. Instead, a taxpayer is allowed a higher annual gift exclusion amount (sometimes referred to as the “super annual exclusion amount”) for gifts to a non-citizen spouse. The super annual exclusion amount will increase to $194,000 (up from $190,000 in 2025). Gifts to a non-citizen spouse that do not exceed the super annual exclusion amount are not counted as taxable gifts. Gifts made in trust do not qualify for the super annual gift exclusion unless the non-citizen spouse has a present interest in the gift, such as a withdrawal power. Alternatively, gifts or bequests made to a “qualified domestic trust” will qualify for the marital deduction.
Generation-Skipping Transfer Tax Exemption
Since 2001, the generation-skipping transfer (GST) tax exemption has been aligned with the lifetime exemption amount. Consequently, the GST tax exemption will increase to $15 million in 2026.
If you have interest or questions about these issues, contact the author or another member of Parker Milliken’s Trusts & Estates Group.
