The Internal Revenue Service (IRS) has announced the annual inflation adjustments for tax year 2027.
A detailed breakdown of tax changes, deductions, and exemptions can be found here.
Some key points regarding the updated gift and estate tax exemptions:
GIFT TAX EXEMPTION
Effective January 1, 2027, an individual can make tax-free gifts of up to $20,000 per recipient (unlimited number of recipients) in the calendar year, an increase from $19,000.
A married couple can make tax-free gifts of up to $40,000 per recipient.
Gifting more than $20,000 per recipient in 2027 requires filing a gift tax return.
The gift exclusion to a spouse who is not a US citizen has increased from $194,000 to $201,000 in 2027. (Also note that while unlimited marital deductions apply to spouses who are both U.S. citizens, that unlimited deduction is not available for non-U.S.-citizen spouses, making this specific annual exclusion necessary.)
ESTATE TAX EXEMPTION
Similarly, the federal estate tax exemption has increased from $15,000,000 per individual in 2026 to $15,480,000 in 2027.
The meaning of this exemption is that a person can gift up to $15,480,000 and a couple up to $30,960,000 combined (assuming both spouses have full exemptions available) over the course of their lifetime without having to pay federal gift or estate tax.
Any exemption not used during a person's lifetime can be used against the estate tax at death.
On the same token, an estate inheritance worth up to these amounts is exempt from federal estate taxes (to the extent not used during lifetime).
NYS ESTATE TAX EXEMPTION
State estate tax is separate from federal estate tax, and the New York State estate tax basic exclusion amount for 2026 is $7,350,000, The exclusion amount for 2027 has not been announced yet, though it's expected to adjust upward slightly for inflation.
A recent, much-publicized proposal by New York City Mayor Zohran Mamdani to drastically lower the NYS estate tax exemption from $7,350,00 to $750,000 and raise the tax rate to 50% lacks a published formal bill copy and has not yet been endorsed by state legislators or Governor Kathy Hochul, and so is not expected to pass for the coming year.
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