2026 Gift Tax Calculator
Are you planning a generous gift to a family member or friend? Most Americans will never actually pay a dime in gift tax, but many are legally required to report their gifts to the IRS.
The 2026 Sunset: Why This Year Matters
This year is a turning point for high-net-worth individuals. The federal lifetime gift and estate tax exemption, which doubled in 2018 under the Tax Cuts and Jobs Act, is scheduled to 'sunset.' This means the amount you can give away tax-free over your lifetime is dropping from roughly $13.6M to approximately $7.6M (adjusted for inflation). If you are planning large transfers, 2026 is the year to run the numbers.
Annual Exclusion vs. Lifetime Exemption
These are two completely different concepts, and understanding both is critical:
When You Must File IRS Form 709
The IRS considers any gift over the annual exclusion a 'reportable gift.' Even if you owe zero tax, you must file Form 709 if:
Gift Tax Rate Table (2026 Progressive Rates)
If you somehow exhaust your lifetime exemption (extremely rare), the following progressive rates apply:
| Taxable Amount Over Exemption | Tax Rate |
|---|---|
| $0 – $10,000 | 18% |
| $10,001 – $20,000 | 22% |
| $20,001 – $40,000 | 24% |
| $40,001 – $60,000 | 26% |
| $60,001 – $80,000 | 28% |
| $80,001 – $100,000 | 30% |
| $100,001 – $150,000 | 32% |
| $150,001 – $250,000 | 35% |
| $250,001 – $500,000 | 37% |
| $500,001 – $750,000 | 39% |
| Over $750,000 | 40% |
Gift Splitting with Your Spouse
If you are married, you and your spouse can combine your annual exclusions and lifetime exemptions through 'gift splitting.' This means:
Exempt Gifts (Always Tax-Free, No Reporting Required)
Certain types of gifts are exempt from gift tax, regardless of amount. These do NOT count against your annual exclusion or lifetime exemption:
State Gift Tax: Connecticut Exception
In the US, only Connecticut has a standalone state-level gift tax. For all other 49 states, you only need to worry about federal gift tax. However, many states have Inheritance Taxes (where heirs pay), Estate Taxes (similar to federal), or both. These are different from gift tax but related.
Common Misconceptions About Gift Tax
Avoid these common mistakes when giving gifts:
2026 Gift Tax FAQ
Q:Does the recipient have to pay income tax on a gift?
No. In the US, gifts are not considered income for the recipient, so they pay zero income tax. The donor (giver) is the only person potentially responsible for any gift tax or reporting requirement.
Q:Can I 'split' a gift with my spouse?
Yes! If you are married, you and your spouse can combine your annual exclusions through 'gift splitting.' For 2026, this means a couple can give $40,000 to a single recipient tax-free. You each file a separate Form 709 to elect this treatment.
Q:What gifts are always tax-exempt, regardless of amount?
Certain gifts never trigger gift tax: (1) Gifts to your spouse (if US citizen), (2) Tuition paid directly to an educational institution, (3) Medical expenses paid directly to a healthcare provider, (4) Gifts to charitable organizations, (5) Gifts to political organizations. These are unlimited and require no reporting.
Q:What is the 2026 'sunset' and why does it matter?
The Tax Cuts and Jobs Act of 2017 doubled the lifetime gift and estate tax exemption, but this was scheduled to expire ('sunset') at the end of 2025. In 2026, the exemption is scheduled to revert from ~$13.6M to approximately $7.6M (adjusted for inflation). If you are planning to make large transfers, 2026 is a critical year to consult a tax professional.
Q:If I give more than $20,000 to one person, do I owe tax?
Not necessarily! Gifts exceeding $20,000 count against your lifetime exemption (~$7.6M), but you only owe tax once you exhaust that multi-million dollar limit. However, you must file IRS Form 709 to report the excess, even if no tax is due.
Q:Can I carry over an unused annual exclusion to next year?
No. The annual exclusion ($20,000) does not roll over. If you give $15,000 to someone one year, you lose the unused $5,000. However, you get a fresh $20,000 annual exclusion for each recipient every January 1st.
Q:Does Connecticut's state gift tax make gifts different there?
Yes, if you are a Connecticut resident, you may owe state gift tax starting at 3.6% on gifts exceeding $20,000. All other states only have federal gift tax (and possibly state estate or inheritance taxes, which are separate). This calculator shows federal only; consult a Connecticut tax professional if applicable.