Annual Gift Tax Exclusion 2026: $19,000, Form 709 and IRS Data

The 2026 number and where it comes from

The rule is one sentence in 26 U.S.C. 2503(b)(1): for gifts “(other than gifts of future interests in property) made to any person by the donor during the calendar year, the first $10,000 of such gifts to such person shall not” be counted as taxable gifts. Section 2503(b)(2) indexes the $10,000 to inflation from 1998, and “If any amount as adjusted under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.” That rounding is why the number moves in steps and sometimes not at all: it stayed at $19,000 from 2025 to 2026.

Each year’s figure is published in the IRS inflation revenue procedure, in the Internal Revenue Bulletin:

Searches for “annual gift tax exclusion 2025” and “2026” land on the same answer: $19,000 for both years. The splitting column is our arithmetic (two times the exclusion). Rev. Proc. 2025-32 states its figures are for “various Code provisions as in effect on October 9, 2025”; the 2027 amount will come in next autumn’s revenue procedure.

The exclusion is per donee, per donor, per calendar year, and there is no limit on the number of donees. It does not carry over: an unused $19,000 in 2026 is gone on January 1, 2027 (our reading of “during the calendar year” in 2503(b)(1)). For a gift in trust, the Form 709 instructions say “each beneficiary having a present interest in such gift is treated as a separate donee for purposes of the annual exclusion.”

Three kinds of transfer sit outside the exclusion altogether, so they do not use it up:

• Tuition paid directly to a school and medical bills paid directly to a provider. Section 2503(e)(1): “Any qualified transfer shall not be treated as a transfer of property by gift for purposes of this chapter.” The instructions add that no exclusion applies to “books, supplies, room and board”, and that a 529 plan contribution does not count as tuition.
• Gifts to a U.S.-citizen spouse, which get an unlimited marital deduction under section 2523(a), equal to the interest’s value.
• Gifts to charity, deductible under section 2522; a return is not needed if those are the only gifts and the donor gave the entire interest (Form 709 instructions).

A 529 plan contribution is a present interest, and the instructions let a donor elect to spread up to $95,000 for one beneficiary over 5 years (2025 instructions). At 2026’s $19,000 the five-year figure is the same $95,000 (our arithmetic).

Present interest: the test that real estate and LLC gifts can fail

“Present interest” is where gifts of property differ from gifts of cash. Treasury Regulation 25.2503-3(a) says “No part of the value of a gift of a future interest may be excluded” and defines future interests as “reversions, remainders, and other interests or estates, whether vested or contingent” that “are limited to commence in use, possession, or enjoyment at some future date or time.” Paragraph (b) gives the other side: “An unrestricted right to the immediate use, possession, or enjoyment of property or the income from property (such as a life estate or term certain) is a present interest in property.”

The regulation’s own examples are worth reading for anyone giving a rental. Example (5) is a trust holding “certain real property, subject to a mortgage” whose income goes to pay the mortgage first; because the beneficiary’s income starts only after payoff, it is “a gift of a future interest in property against which no exclusion is allowable.” Example (1), a trustee who may withhold income at discretion, is also a future interest.

How that plays out for the assets in our reader’s hands (our reading of the regulation and the Form 709 instructions):

Trusts that want the exclusion usually give each beneficiary a temporary right to withdraw each contribution, often called a Crummey power after the Ninth Circuit decision at 397 F.2d 82 (1968); the withdrawal right is what supplies the present interest (our reading; the details of notice and lapse are for the drafting lawyer). The point for an owner of LLC units is the reverse: the same operating agreement provisions that support a valuation discount (no control, no market, no forced distributions) are the ones that can turn the gift into a future interest (our reading). Our page on real estate partnerships and LLCs in SEC Form D data shows how common these entities are as holding vehicles.

When Form 709 is required even if no tax is due

Section 6019 requires a return for any gift other than one fully covered by the annual exclusion or the tuition and medical rule, a marital-deduction gift, or a qualifying charitable gift. The Form 709 instructions (2025, the latest published as of October 12, 2026) turn that into a list, and the same rules apply to 2026 gifts at the $19,000 figure:

Deadline. Section 6075(b)(1): returns “shall be filed on or before the 15th day of April following the close of the calendar year.” For 2026 gifts that is April 15, 2027 (our reading). An extension of the income tax return extends the gift tax return too, but not the time to pay. Spouses cannot file a joint gift tax return.

Gift splitting has a clock. The consent “may not be signified after the 15th day of April following the close of such year” unless neither spouse has filed by then (section 2513(b)(2)(A)), and once given it makes “the liability with respect to the entire tax imposed by this chapter of each spouse for such year” joint and several (section 2513(d)). It also applies to all gifts to third parties that year, not one chosen gift (section 2513(a)(2)).

Giving a rental, a fractional deed or LLC units: value, discounts and disclosure

Section 2512(a) values a gift of property at “the value thereof at the date of the gift”. Regulation 25.2512-1 defines that value as “the price at which such property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell”, and adds that property “shall not be returned at the value at which it is assessed for local tax purposes” unless that equals fair market value. A county tax assessment is not an appraisal (our reading).

For a business or partnership interest, Regulation 25.2512-3 asks for “A fair appraisal as of the date of the gift of all the assets of the business”, its earning capacity and the stock-valuation factors, and says “Complete financial and other data upon which the valuation is based should be submitted with the return”.

A gift of 10% of an LLC is usually worth less than 10% of what the LLC owns, because a minority holder cannot force a sale or a distribution and has no market for the units (our reading). The Form 709 instructions require the donor to say so: if a value “includes a discount for lack of marketability, a minority interest, a fractional interest in real estate, blockage, market absorption, or for any other reason”, answer “Yes” at the top of Schedule A and “attach an explanation giving the basis for the claimed discounts and showing the amount of the discounts taken.” How large those discounts can be, and the cases on family partnerships, are a separate subject.

Why the disclosure matters more than the discount. The three-year assessment period for a gift starts only if the gift is adequately disclosed. Regulation 301.6501(c)-1(f)(2) requires, for an interest in an entity that is not traded, a statement of “the fair market value of 100 percent of the entity (determined without regard to any discounts in valuing the entity or any assets owned by the entity)”, the pro rata share transferred and the reported value, unless a qualified appraisal is attached instead. The regulation’s Example 4 is a limited partnership interest whose lower-tier entity owns commercial real property; because the lower tiers were not described, “the period of assessment for the transfer under section 6501 will remain open indefinitely.” And under section 6501(c)(9), a gift that had to be shown and was not can be assessed “at any time.”

That makes a gift of a rental or LLC units a three-document job in practice: an appraisal of the property, an appraisal of the interest (with the discounts explained), and a Form 709 that discloses both (our reading of the regulation).

A worked example: LLC units to two children in 2026

Our illustration, with stated assumptions. A married couple owns 100% of an LLC holding one rental worth $1,200,000, with a combined adjusted basis of $300,000. In 2026 they give 10% of the units to each of two children and elect gift splitting. The 25% discount is an assumption for illustration only, not a figure the IRS accepts; a real number comes from a qualified appraisal. Federal law only (our arithmetic throughout).

What the table shows (our reading): with no gift tax payable in either column, the present-interest question decides how much of the $15,000,000 each spouse has left, not what is paid today. And neither column changes the basis: the children carry the parents’ $30,000 into any sale.

For cash, the arithmetic is simpler: a couple splitting gifts to two children and four grandchildren can move $228,000 in 2026 (6 times $38,000) without a taxable gift, though the split itself still needs a Form 709 if one spouse wrote all the checks and any donee got more than $19,000 from that spouse (our arithmetic; Instructions for Form 709).

The $15,000,000 lifetime exemption and what “using it” means

There is one unified credit for gifts and estates. Section 2505(a) allows against gift tax “the applicable credit amount in effect under section 2010(c) which would apply if the donor died as of the end of the calendar year”, less the credit used in earlier years. Public Law 119-21, signed July 4, 2025, struck the temporary 2018-2025 doubling in section 2010(c)(3)(C) and replaced the $5,000,000 base with $15,000,000; its section 70106(b) says the change applies “to estates of decedents dying and gifts made after December 31, 2025.” Rev. Proc. 2025-32 confirms $15,000,000 for 2026 and says the basic exclusion “will be adjusted for inflation for calendar year 2027 and future years.” The law has no sunset date (our reading of section 70106).

“Using” the exemption means this, step by step (our reading of sections 2001, 2502 and 2505):

• Each year’s taxable gifts (gifts above the annual exclusions, after marital and charitable deductions) are added to all earlier ones on Form 709.
• Tax is computed on the cumulative total at the section 2001(c) rates, which reach 40% above $1,000,000 of tax base, and the credit wipes it out until the total passes the basic exclusion. The credit on $15,000,000 is $5,945,800 ($345,800 plus 40% of $14,000,000, our arithmetic from the rate table; the 2025 instructions give $5,541,800 for 2025’s $13,990,000).
• At death, section 2001(b) adds “adjusted taxable gifts” back into the estate tax computation, so exemption used for gifts is not available again for the estate.
• Gift tax actually paid on gifts within 3 years of death is pulled back into the gross estate (section 2035(b)).

A surviving spouse may also apply a deceased spouse’s unused exclusion (DSUE) to lifetime gifts, but only if the deceased spouse’s executor elected it on a timely estate tax return (section 2010(c)(5)(A)), and the instructions say “DSUE may not be applied to gifts made before the DSUE arose.”

The price of giving now: carryover basis under section 1015

A gift moves the property, and the tax basis moves with it. Section 1015(a): “the basis shall be the same as it would be in the hands of the donor”, except that if the donor’s basis is higher than the value at the date of the gift, “for the purpose of determining loss the basis shall be such fair market value.” Gift tax paid adds to basis only for the share attributable to appreciation, and never above value at the gift (section 1015(d)(1) and (d)(6)).

In our example each child’s $30,000 basis means a sale of the units at $120,000 produces $90,000 of gain. If the parent had held the units until death, the basis would have been the value at death, and a sale at that value would produce $0 (section 1014(a)(1); our arithmetic). That trade, exemption and future growth out of the estate against a lost step-up, is covered for inherited property in our step-up in basis guide. Depreciation the parent took is not recaptured at the gift itself (section 1250(d)(1)), but it stays in the carried-over basis and comes back on the child’s sale, as our depreciation recapture walkthrough explains.

What IRS data show about the people who file Form 709

The IRS Statistics of Income Division publishes one table a year from a sample of gift tax returns. The latest, for returns filed in 2021 (published July 2023), mostly covers gifts made in 2020, when the annual exclusion was $15,000 and the lifetime exemption $11,580,000 (IRS Publication 5368).

What the 2021 table says about the typical filer (shares are our arithmetic):

• Filing is about the exemption, not the tax. 206,603 returns, 82.4%, applied unified credit, for $56.98 billion of credit. 43,383 returns, 17.3%, reported no current taxable gifts at all: everything was covered by exclusions or deductions, and they filed anyway, typically to split gifts or report future interests.
• Annual exclusions were $9.82 billion on 238,709 returns, 5.4% of the $182.58 billion reported.
• Big gifts dominate the dollars. Returns with $1 million or more of current taxable gifts were 29,217, 11.6% of returns, but reported $133.98 billion, 73.4% of all gifts. Only 1,099 of them owed tax, and they paid $2.73 billion.
• Repeat givers. 121,830 returns, 48.6%, reported taxable gifts from earlier years.

The SOI table does not break 2021 gifts down by asset type in numbers (the 2021 OneSheet shows it only as a chart, with real estate and partnership interests as separate bars). The last published numbers are in the Summer 2019 SOI Bulletin for gifts made in 2010-2016, in 2016 dollars:

2012 is the year in which, the SOI article says, many taxpayers may have assumed the exemption would revert from $5.12 million, and returns rose 42.9% over 2011 (our arithmetic), with real estate a quarter of the value. The article’s footnote puts partnerships and noncorporate business assets in “other assets”. Fewer returns are being filed now: the IRS Data Book counts 313,197 Form 709s in fiscal year 2024 and 311,332 in fiscal year 2025, with gross gift tax collections of $2.97 billion in fiscal 2025. The drop scheduled for the end of 2025 under the old section 2010(c)(3)(C) did not happen, because Public Law 119-21 struck that subparagraph and set the base at $15,000,000 (our reading).

Received a large gift? Who owes what

• The donor pays the gift tax. Section 2502(c): “The tax imposed by section 2501 shall be paid by the donor.”
• The recipient is a backstop. Section 6324(b) makes gift tax a lien on the gifts “for 10 years from the date the gifts are made”, and “If the tax is not paid when due, the donee of any gift shall be personally liable for such tax to the extent of the value of such gift.” The Form 709 instructions say the same.
• No income tax on receipt. Section 102(a): “Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.” Income the property earns afterwards, such as rent, is the recipient’s income.
• The recipient inherits the donor’s basis (section 1015(a)), so ask the donor for the purchase price, improvements and depreciation history in writing at the time of the gift. If those facts are unknown, the statute lets the IRS find them, and if it cannot, use a value it determines for when the donor acquired the property (section 1015(a)).
• Gifts from abroad are a separate reporting regime; for 2026, Rev. Proc. 2025-32 sets the threshold for large gifts from certain foreign persons at $20,573 (section 6039F).

State gift taxes and gifts added back at death

Connecticut ties its threshold to the federal number by definition: section 12-643(4) defines the “Federal basic exclusion amount” as “the dollar amount published annually by the Internal Revenue Service”, so for 2026 gifts the Connecticut exemption follows the federal $15,000,000 (our reading). Connecticut’s taxable gifts start from the federal definition in section 2503, so the $19,000 federal exclusion carries through (section 12-643(1), our reading).

For New York, the Department of Taxation’s page for 2026 deaths still applies the add-back, which the earlier statute ended for deaths on or after January 1, 2026; the bill text replaces “twenty-six” with “thirty-two”. We could not fetch the consolidated statute from the New York Senate site (it returned an error on October 12, 2026), so the 2032 date is from the bill text, not the codified law. The add-back matters for a New York resident who gives a property and dies within 3 years: the gift escapes New York estate tax only if the donor survives the period (our reading).

Decision points, and who actually does the work

Nothing in the annual exclusion requires a professional for a cash gift of $19,000. A gift of a rental, a fractional deed or LLC units is different, and the work is done by three people (our reading of the documents above):

• A qualified appraiser values the property and, separately, the interest given, explaining any discount (Regulation 301.6501(c)-1(f)(3)).
• A CPA or an estate-planning attorney prepares Form 709, the Schedule A discount disclosure and the 100%-of-entity statement, and keeps the cumulative record of exemption used. A financial adviser does not file the return.
• The attorney who drafts the LLC agreement or trust decides whether the gift is a present interest: distribution rights, transfer restrictions, withdrawal powers.

The decision itself turns on four questions: whether the gift should be a present interest (cash or income-paying units) or can be a future interest that uses exemption; whether the loss of the step-up on a low-basis property outweighs moving its future growth out of the estate; whether a spouse will consent to split every gift that year; and, for Connecticut, New York or Minnesota residents, the state rule. A financial adviser can help with the second question as part of the whole balance sheet; the other three belong to the CPA, attorney and appraiser.

This is analysis of public documents, not investment, legal or tax advice.

What a parent or grandparent can do with this

• Count donees, not dollars. $19,000 per person per donor per year; a couple splitting gifts reaches $38,000 per person, with a Form 709 for the split.
• Pay tuition and medical bills directly to the school or provider; those payments do not use the exclusion (section 2503(e)).
• Before giving LLC units, read the operating agreement for distribution and transfer terms; that is where the present-interest answer is.
• Get the appraisal before the gift date and keep the 100%-of-entity value for the return.
• Hand the recipient the basis file: purchase price, improvements, depreciation taken.
• File by April 15, 2027 for 2026 gifts that need a return, even when the tax is zero; the return is what starts the limitations clock.
• If you received the gift: no income tax on receipt; keep the donor’s basis records; the donor owes any gift tax, and you are liable only if it goes unpaid.

FAQ

Sources, read and saved on October 12, 2026: Rev. Proc. 2025-32, Rev. Proc. 2024-40 and Rev. Proc. 2023-34 (irs.gov); 26 U.S.C. 102, 1015, 2001, 2010, 2035, 2501, 2502, 2503, 2505, 2511, 2512, 2513, 2522, 2523, 6019, 6075, 6324 and 6501, United States Code 2024 edition, Government Publishing Office (govinfo.gov); Public Law 119-21 section 70106 (govinfo.gov); 26 CFR 25.2503-3, 25.2503-6, 25.2511-1, 25.2512-1, 25.2512-3, 25.2513-1 and 301.6501(c)-1 (ecfr.gov); Instructions for Form 709 (2025) (irs.gov); IRS Statistics of Income, Gift Tax Returns Filed in 2021, 2020 and 2019, Table 1 (21gf01.xlsx, 20gf01.xlsx, 19gf01.xlsx), saved with the script that read them; IRS Publication 5368 (Rev. 7-2023); IRS SOI Bulletin, Summer 2019, “2010–2016 Gifts”; IRS Data Book 2025 (Publication 55-B); Connecticut General Statutes chapter 228c (cga.ct.gov); New York Department of Taxation and Finance, estate tax page (tax.ny.gov) and New York Assembly bill A3009-C (2025), Part T (nyassembly.gov); Minnesota Statutes section 291.016 (revisor.mn.gov). The two court citations are given by official citation; their opinion texts could not be retrieved and are not quoted. Shares, sums and the worked example are our arithmetic, with the assumptions stated. This is analysis of public documents, not investment, legal or tax advice.