Generation-Skipping Transfer Tax 2026: $15M Exemption, IRS Data

What the tax is, in the Code’s own words

Chapter 13 of the Internal Revenue Code is short. Section 2601 imposes a tax “on every generation-skipping transfer”, section 2602 sets the amount as the taxable amount times the applicable rate, and section 2641(a) defines that rate as the product of the maximum federal estate tax rate and the inclusion ratio. The maximum estate tax rate in section 2001(c) is 40% on amounts over $1,000,000 (the top line of the rate schedule). So the arithmetic for any skip is: 40% times the inclusion ratio times the taxable amount. With a ratio of zero, nothing is owed; with a ratio of one, 40% is owed on top of any estate or gift tax.

The Code names three events (section 2611(a)). They are taxed on different people and reported on different forms:

The three taxable events (26 U.S.C. 2603, 2611, 2612, 2621-2623; IRS instructions as of November 13, 2026):

Two exclusions matter to a family. Section 2611(b)(1) says the tax does not cover a transfer that would not be a taxable gift because of section 2503(e), which is the exclusion for tuition paid to a school and medical expenses paid to a provider. And a transfer that was already taxed under the chapter to a person in the same or a lower generation is not taxed again (section 2611(b)(2)).

Who is a skip person, and the grandchild whose parent has died

Section 2613(a)(1) defines a skip person as a natural person assigned to a generation “2 or more generations below the generation assignment of the transferor”. A grandchild is two generations below a grandparent; a child is one. A trust is a skip person if every interest in it is held by skip persons, or if nobody holds an interest and no distribution can ever go to a non-skip person (section 2613(a)(2)).

The Code then moves some grandchildren up a generation. Under section 2651(e)(1), a descendant of the transferor’s parent whose own parent, a lineal descendant of that parent, is dead when the transfer is first taxed under the estate or gift tax is treated as one generation below the lower of the transferor’s generation and the generation of the youngest living ancestor of that person who is also a descendant. In plain terms, a grandchild whose mother or father (your child) has died before you give or bequeath is treated like a child, not a skip person. A bequest to that grandchild is not a direct skip and does not use any exemption (our reading). There is a limit: for a person who is not a lineal descendant, the rule does not apply if the transferor has any living lineal descendant (section 2651(e)(2)).

The test is applied when the transfer is made, so it can change with a death. A gift made while the child is alive is a skip; a bequest of the same property after the child has died is not (our reading).

The exemption in 2026 and 2027

Section 2631(a) gives every individual a GST exemption to allocate, section 2631(b) makes an allocation irrevocable, and section 2631(c) sets the amount for any calendar year equal to the basic exclusion amount for that year. The IRS fixed both numbers in revenue procedures. Rev. Proc. 2025-32 says: “For calendar year 2026, the generation-skipping transfer exemption amount under § 2631(c) is equal to $15,000,000.” Rev. Proc. 2026-35, section 3.44, sets the basic exclusion amount for 2027 at $15,480,000 and adds: “The basic exclusion amount is also used in determining the generation-skipping transfer exemption amount under section 2631(c).” Our page on the 2027 estate and gift tax numbers covers the other figures in that revenue procedure.

The GST exemption per person (Instructions for Form 709 (2025), Rev. Proc. 2025-32, Rev. Proc. 2026-35):

For 2026 the GST exemption is $15,000,000 per person, so a married couple has $30,000,000 only if both spouses use their own. Nothing in section 2631(c) lets a surviving spouse add the other’s unused exemption; our dynasty trust page works through that case, the allocation routes in section 2632 and how long a trust can last in five states, so this page does not repeat them. Our estate tax exemption page explains how the $15,000,000 base came about.

One date matters before year-end. A gift made on or before December 31, 2026 draws on the $15,000,000 figure and a $19,000 annual exclusion; a gift made on January 1, 2027 or later has $15,480,000 and $20,000 (Rev. Proc. 2025-32, section 4.42(1); Rev. Proc. 2026-35, section 3.46(1)). The Form 709 instructions add that “each annual increase” can generally be allocated only to transfers made, or appreciation occurring, in or after the year of the increase.

Gifts that never use the exemption

Some transfers to grandchildren are cleared before the exemption comes into play:

Transfers to grandchildren that carry an inclusion ratio of zero or are outside the tax (26 U.S.C. 2611, 2642, 2652; Rev. Proc. 2025-32; Rev. Proc. 2026-35):

The annual exclusion does not cover a gift of a future interest in property (Rev. Proc. 2025-32, section 4.42(1); Rev. Proc. 2026-35, section 3.46(1)), which is the usual form of a gift into a trust. The Form 709 instructions warn that a transfer to a trust “may be subject to the GST tax at a later date” even when it is less than the annual exclusion, and that a gift to a “GST trust” can have exemption allocated automatically. Valuing a gift of a partnership or LLC interest that owns real estate is covered on our Form 709 page for illiquid interests.

Which form, who files, by when

GST forms and who files them (Instructions for Forms 709 (2025), 706 (Rev. July 2026), 706-GS(T), 706-GS(D) and 706-GS(D-1) (Rev. December 2025)):

The last row is the one families miss. A trust with an inclusion ratio of zero owes no GST tax on a payout to a grandchild, but the trustee still files a Form 706-GS(D-1) for it by April 15 of the next year (Instructions for Form 706-GS(D-1)). The grandchild then has nothing to file on Form 706-GS(D) if the form shows zero.

What the IRS data shows: how many people report GST tax

The IRS publishes no table of GST tax by itself, and we looked for one. Three sets of official numbers touch it, each partial:

Forms 709: the GST tax reported on gifts

The IRS Statistics of Income gift tax tables (Table 1, one per filing year) list net tax on current period gifts (Form 709, Part 2, line 15) and total tax (line 17), which the IRS defines as gift tax plus GST tax. Its footnote on returns classified as nontaxable says they “may have total tax greater than $0 due to reporting GST taxes.” The gap between the two lines is the GST tax reported on those returns:

Forms 709 filed in each year, from IRS Statistics of Income Table 1 (sample estimates; the last two columns are our arithmetic):

Seven years add up to $242.1 million (our arithmetic), against $2.76 billion of net gift tax in 2021 alone. In 2021 GST tax was 1.8% of the gift tax plus GST tax total (our arithmetic). The numbers swing from $5.8 million to $62.1 million with no trend, which fits a tax paid by a small number of very large gifts. The latest table the IRS has posted is for 2021. The data are for lifetime gifts only: taxable distributions and terminations are on other forms, and neither is in these tables.

Estate tax returns: who gets the bequests

The estate tax study (Table 4) lists bequests by beneficiary type on the Form 706. It does not separate GST tax, but it shows how much goes to grandchildren, the group a GST exemption is for:

Bequests to grandchildren on estate tax returns filed in each year, from IRS Statistics of Income Table 4 (money in thousands of dollars in the IRS table; share is our arithmetic):

In 2024 the spouse category held $83.8 billion and children $42.4 billion (Table 4). A further $39.0 billion went to “a trust, unknown group of beneficiaries, estate, or other entity”, where grandchildren may also be beneficiaries, and the IRS cannot say how much. Not every bequest to a grandchild is a skip: the predeceased-parent rule removes some, and the exemption covers most of the rest.

The same study counts returns: 8,130 estate tax returns filed in 2022 (3,170 taxable, $22.5 billion of net estate tax), 9,024 in 2023 (3,690 taxable, $44.4 billion) and 7,195 in 2024 (2,663 taxable, $23.3 billion), sample estimates in Table 1. Our page on federal estate tax by state has the Data Book view of the same returns.

The Data Book: the GST forms are not split out

The IRS Data Book 2025 counts “Estate tax” returns in Table 1-2 at 31,516 in fiscal 2024 and 28,495 in fiscal 2025. Its footnote says the line “Includes the Form 706 series as follows”: Form 706, Form 706-GS(D), Form 706-GS(T) and Form 706-NA. We looked for a separate count of Forms 706-GS(D) and 706-GS(T) in the 2025 edition and did not find one; the Data Book gives only the combined figure. A reader who wants a number of trusts that reported a taxable termination or distribution will not find it in the Data Book, and any article that quotes one needs to say where it comes from.

A $3,000,000 rental property in trust for grandchildren (our arithmetic)

The inputs: a rental building worth $3,000,000 on the day it passes, put into a trust that only grandchildren can benefit from, with grandchildren whose parents are alive. The rate is 40% times the inclusion ratio, which is 1 minus the exemption allocated divided by the value (section 2642(a)). Nothing else changes between the rows.

Three cases for the same $3,000,000 property (our arithmetic; GST tax only, estate and gift tax excluded):

In the first row the exemption left afterward is $12,000,000 in 2026 ($15,000,000 less $3,000,000) or $12,480,000 in 2027 ($15,480,000 less $3,000,000), if the donor has used nothing else. The last two rows show what the $480,000 increase is worth to a donor who has already used $14,000,000: $192,000 of tax on the same property (40% times $480,000). A donor who has used all of the 2026 exemption gets the whole $480,000 as new room on January 1, 2027. For a gift, the exemption is measured on the value at the time of the gift (section 2642(b)(1)), so an appraisal of the property is part of the filing. For a bequest of the same property in trust for grandchildren, the executor allocates on Schedule R and the value is the estate tax value (section 2642(b)(2)). A gift also carries the donor’s basis to the trust, while property that is in the estate gets a new basis at death; our step-up in basis page covers what that costs on a sale.

If the grandchildren’s parent has died before the transfer, the first column of the table changes: the grandchildren are treated as one generation below the transferor under section 2651(e), the trust is not a skip person, and no GST tax can arise from a transfer to it (our reading).

What a reader can do with this

Questions the documents let you answer before any meeting:

• Count the exemption you have used. Add every amount allocated on a past Form 709 (Schedule D Part 2 is the running record) and every automatic allocation to a trust for a grandchild. The amount left is $15,000,000 minus that for 2026, and $15,480,000 minus that for 2027.
• Check each grandchild’s parent. List who is alive. Under section 2651(e) a grandchild whose parent has died is not a skip person for a transfer made after that death.
• Separate the small gifts. Annual exclusion gifts to a grandchild ($19,000 in 2026, $20,000 in 2027) and direct tuition or medical payments use none of the exemption.
• Look at the trust, not only the gift. A trust with grandchildren and children as beneficiaries can pay a taxable distribution later; the trustee files Form 706-GS(D-1) for each skip person every year there is one, even at an inclusion ratio of zero.
• Put the dates on a calendar. Form 709 for 2026 gifts and the trustee’s Forms 706-GS(T) and 706-GS(D-1) for 2026 events are due April 15, 2027.

The decision, and who makes it. Deciding whether to give now or at death, and in what form, is drafted by an estate-planning attorney, the allocation and the forms are completed by that attorney or a CPA, and a financial adviser can show what the property and its rent are worth in the plan. Nothing here is a recommendation to make a transfer.

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

FAQ

Sources, read and saved on November 13, 2026: 26 U.S.C. 2001 (law.cornell.edu), 2503 and chapter 13, sections 2601 to 2664, United States Code 2024 edition (govinfo.gov); Rev. Proc. 2025-32 and Rev. Proc. 2026-35 (irs.gov); Instructions for Form 709 (2025), Form 709, Instructions for Form 706 (Rev. July 2026), Forms and Instructions 706-GS(T), 706-GS(D) and 706-GS(D-1) (Rev. December 2025) (irs.gov); IRS Statistics of Income, Gift Tax Study Table 1 for filing years 2015 to 2021 and Estate Tax Returns Study Tables 1 and 4 for filing years 2022 to 2024 (irs.gov/pub/irs-soi), sample estimates; IRS Data Book 2025, Publication 55-B, Table 1-2. The 2024 edition of the Code was read for chapter 13; the $15,000,000 and $15,480,000 figures are from the revenue procedures. The GST tax on Forms 709, the share of bequests, the examples and the 2027 room are our arithmetic from those tables; the IRS tables do not report them. This is analysis of public documents, not investment, legal or tax advice.