Gift Tax Annual Exclusion 2027: $20,000, Up From $19,000
The 2027 gift tax annual exclusion is projected at $20,000 per recipient, up from $19,000, under the same CPI formula behind the tax brackets.
Every year the annual gift tax exclusion quietly resets, and for two years running it hasn’t moved at all. That’s about to change. The short answer: the gift tax annual exclusion for 2027 is projected at $20,000 per recipient, up from $19,000 in both 2025 and 2026, under the same cost-of-living formula that sets the federal income tax brackets each fall. The Bureau of Labor Statistics has already published the last piece of data that formula needs. The IRS just hasn’t issued the paperwork yet.
The statute and the rounding
The gift tax annual exclusion comes from 26 U.S.C. section 2503(b). Its base amount is $10,000 per donee per year, and that base only applies to present-interest gifts — money or property the recipient can use or enjoy right away, as opposed to a future interest like the remainder of a trust, which gets no exclusion at all no matter the amount. Since 1998, section 2503(b)(2) has indexed that $10,000 base for inflation using the cost-of-living formula in section 1(f)(3), with “calendar year 1997” substituted into the statute’s language. The rounding rule is spelled out in the same subsection: “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’s a coarser rounding increment than some other inflation-indexed figures in the tax code, which is exactly why the exclusion can sit still at the same number for more than one year running, the way it just did.
The formula itself runs on a specific twelve-month window: the average of the chained CPI-U for all urban consumers over the twelve months ending August 31 of the prior year. That’s the identical window this site’s 2027 IRS inflation adjustments tracker follows for the tax brackets and the standard deduction. The August 2026 reading — the twelfth and final month that window needs — was published by the Bureau of Labor Statistics on September 11, 2026. Once that number lands, the gift tax calculation has everything it requires, even though the IRS’s own publication of the result is a separate, later step.
Checking the method against 2026
Before trusting a formula to project a figure the IRS hasn’t announced, it should first reproduce a figure the IRS already has announced, and this is a useful case for showing why the exclusion didn’t move in 2026. Revenue Procedure 2025-32, section 4.42, sets the 2026 exclusion at $19,000, stating verbatim that “For calendar year 2026, the first $19,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts.” Running the cost-of-living mechanics against the confirmed 2026 window produces an unrounded figure of $19,487.14. That’s $512.86 short of the next $1,000 step up to $20,000, so the statute’s round-down rule sends it back to $19,000 — identical to 2025’s figure, from Revenue Procedure 2024-40. The same underlying window, in the range of 177.1105 to 177.1135, reproduces all eighteen figures this site has tested against that revenue procedure, gift tax exclusion included, which is the check that makes the 2027 projection below worth taking seriously.
Why October 2025 doesn’t matter here — mostly
There is one genuine complication sitting inside the 2027 window, and it deserves to be named directly rather than glossed over. The Bureau of Labor Statistics never published a chained CPI-U reading for October 2025, because data collection stopped during that year’s government shutdown. Anyone reconstructing the twelve-month average ending August 2026 has to choose between two approaches: average the eleven months that do exist, or fill the gap with an imputed estimate for the missing month.
For the ordinary $20,000 exclusion, it doesn’t matter which choice the IRS makes. Averaging the eleven published months produces an unrounded figure of $20,119.42. Imputing the missing October reading instead produces $20,094.43. Both numbers clear the $20,000 rounding step — by $119.42 in one version, by $94.43 in the other — and both round down to the identical $20,000 under the statute’s round-to-the-nearest-$1,000 rule. The margin is real but comfortable enough that this particular figure isn’t sitting on the edge.
The exclusion for gifts to a non-citizen spouse is a different story, because its own base amount happens to sit closer to a rounding boundary. Section 2523(i)(2) sets that separate, larger exclusion at a $100,000 base, indexed the same way and rounded down to the nearest $1,000. For 2026 it came in at $194,000. For 2027, the eleven-month average produces $201,000 while the imputed twelve-month average produces $200,000 — a genuine $1,000 difference that depends entirely on which of the two October methods the IRS settles on. Until the revenue procedure is published, that one figure has a real range rather than a single answer; the ordinary per-recipient exclusion does not.
What $20,000 is worth for a married couple
The exclusion applies per giver, per recipient, per year, which means the dollar value scales quickly once a family has more than one person to give to. Section 2513 lets a married couple elect gift splitting, treating a gift made by one spouse as if half came from each — the practical effect is that the couple’s combined exclusion per recipient doubles, even when only one spouse’s name is on the check. In 2027 that turns the $20,000 individual exclusion into $40,000 per recipient, up from $38,000 in 2026. Gift splitting isn’t automatic; both spouses have to consent, and the election is made by filing Form 709 for the relevant year, a mechanic covered in more detail on this site’s page on whether both spouses have to file Form 709 for gift splitting.
Take a grandparent couple with three grandchildren who wants to use the full exclusion for each grandchild in 2027, splitting every gift. Each grandchild can receive $40,000 — $20,000 attributed to each grandparent — without touching either grandparent’s lifetime exemption or requiring any tax to be paid. Across three grandchildren, that’s $120,000 moved out of the couple’s estate in a single year using nothing but the annual exclusion, up from $114,000 doing the identical thing in 2026. Multiply that by however many years the couple keeps doing it, and the exclusion becomes one of the more effective, most boring tools in estate planning: it requires no trust, no valuation discount, and no return to file, as long as gift splitting isn’t being elected on the same year’s Form 709 for some other reason.
| 2026 (confirmed) | 2027 (projected) | |
|---|---|---|
| Exclusion per recipient, single giver | $19,000 | $20,000 |
| Exclusion per recipient, married couple splitting | $38,000 | $40,000 |
| Exclusion to a non-citizen spouse | $194,000 | $200,000–$201,000 |
| Three grandchildren, couple splitting | $114,000 | $120,000 |
| 529 five-year election, single giver | $95,000 | $100,000 |
| 529 five-year election, couple splitting | $190,000 | $200,000 |
Front-loading a 529 plan
The annual exclusion has a second, less obvious use built directly into the tax code for education savings. Section 529(c)(2)(B) states verbatim that “If the aggregate amount of contributions described in subparagraph (A) during the calendar year by a donor exceeds the limitation for such year under section 2503(b), such aggregate amount shall, at the election of the donor, be taken into account for purposes of such section ratably over the 5-year period beginning with such calendar year.” In plain terms, a person can front-load five years’ worth of annual exclusions into a 529 plan in a single year, as long as they elect on Form 709 to spread the contribution ratably over the following five years instead of using up lifetime exemption for the excess.
At the 2027 exclusion of $20,000, that means a single grandparent or parent can contribute $100,000 to one beneficiary’s 529 account in one year — five times $20,000 — and treat it as though $20,000 were given in each of five calendar years. That’s up from $95,000 doing the identical thing in 2026, five times the prior $19,000 figure. A married couple electing both gift splitting and the five-year 529 election together can front-load $200,000 for one beneficiary in 2027, up from $190,000 in 2026. The strategy is popular precisely because it lets a large lump sum go to work compounding inside the 529 account immediately, rather than trickling in over five separate years.
What’s unlimited beyond the exclusion
Two categories of payment escape the gift tax system entirely, without touching the annual exclusion or the lifetime exemption at all. Section 2503(e) states that tuition paid directly to an educational organization, and payments made directly to a medical care provider on someone else’s behalf, are “not … treated as a transfer of property by gift.” The key word is direct: the payment has to go straight to the school or the medical provider, not to the student or patient first. Done that way, a grandparent can pay a grandchild’s full college tuition bill directly to the university in the same year they also give that grandchild the full $20,000 annual exclusion in cash, and neither payment uses any lifetime exemption or requires a gift tax return.
The ABLE account overlap, and the lifetime exemption behind it
For 2026, the annual contribution limit for ABLE accounts — tax-advantaged savings accounts for people with disabilities — happened to sit at $20,000, a full $1,000 above that year’s $19,000 gift tax exclusion, because the two limits are indexed from different 1996 and 1997 base years under different formulas. In 2027, both figures land on the identical $20,000, closing that one-year gap; the mechanics and the separate Saver’s Credit rule tied to ABLE contributions are covered on this site’s ABLE account contribution limit page.
Gifts that exceed the annual exclusion to one recipient in one year don’t simply become taxable. They use up part of the giver’s lifetime gift and estate tax exemption, a separate and far larger number projected at $15,490,000 for 2027, up from $15,000,000 in 2026, tracked in more detail on this site’s page on the 2027 estate and gift tax exemption projection. Filing Form 709 for an over-the-exclusion gift is a compliance requirement; actually owing gift tax only happens once a person’s cumulative lifetime gifts exceed that much larger exemption amount. One narrower related question — how the annual exclusion interacts with contributions to the new Trump accounts under the safe harbor in Rev. Proc. 2026-25 — is covered separately on this site’s Trump account gift tax safe harbor page.
The calendar from here
The IRS confirmed the 2026 gift tax exclusion in Revenue Procedure 2025-32. There’s no announced date yet for the 2027 revenue procedure, but the same office has historically issued it in the same window, roughly mid-October through November of the preceding year. Watch this site’s IRS 2027 inflation adjustments tracker for the official figure once it’s published, including whichever way the non-citizen spouse exclusion and the October 2025 data gap ultimately resolve.
Sources
- 26 U.S.C. § 2503 — law.cornell.edu/uscode/text/26/2503
- 26 U.S.C. § 2513 — law.cornell.edu/uscode/text/26/2513
- 26 U.S.C. § 2523 — law.cornell.edu/uscode/text/26/2523
- 26 U.S.C. § 529 — law.cornell.edu/uscode/text/26/529
- Rev. Proc. 2025-32, § 4.42 (2026 gift tax annual exclusion) — irs.gov/pub/irs-drop/rp-25-32.pdf
- Rev. Proc. 2024-40, § 4.43 (2025 gift tax annual exclusion) — irs.gov/pub/irs-drop/rp-24-40.pdf
- Bureau of Labor Statistics, Chained CPI-U series SUUR0000SA0 — api.bls.gov/publicAPI/v2/timeseries/data/
- finbarrow, IRS 2027 inflation adjustments tracker — companion page for the shared CPI window
Quick answers
What is the 2027 gift tax annual exclusion?
It is projected at $20,000 per recipient, up from $19,000 in both 2025 and 2026. That means a single person can give up to $20,000 to as many different people as they want in 2027 without filing a gift tax return or using any of their lifetime exemption. A married couple who elects gift splitting can give $40,000 to each recipient. The IRS has not yet published the official revenue procedure confirming this figure, but the underlying cost-of-living formula already closes on $20,000 regardless of one open data question described below.
Why did the gift tax exclusion stay at $19,000 for two years in a row?
Because the cost-of-living formula in section 1(f)(3) only raises the exclusion when the indexed value crosses a full $1,000 step, and the underlying figure for 2026 landed at an unrounded $19,487.14. That number is $512.86 short of the next step up to $20,000, so the statute rounds it back down to $19,000, matching 2025 exactly. The 2027 figure clears the same $20,000 step by between $94 and $119, depending on one data question, which is a comfortable enough margin that the flat two years is ending.
Does the missing October 2025 inflation report affect the 2027 gift tax exclusion?
It affects the decimals, not the headline figure. The Bureau of Labor Statistics never published a chained CPI-U reading for October 2025 because data collection stopped during that year's government shutdown. Averaging the eleven published months of the twelve-month window produces an unrounded exclusion of $20,119.42; filling the gap with an imputed October reading instead produces $20,094.43. Both numbers round down to the same $20,000 under the statute's rounding rule, so the missing month does not change the answer for the ordinary exclusion. It does change the separate exclusion for gifts to a non-citizen spouse, which lands at either $201,000 or $200,000 depending on which method the IRS ultimately uses.
Can a married couple combine their gift tax exclusions?
Yes, through an election called gift splitting under 26 U.S.C. section 2513, and it effectively doubles the exclusion per recipient even when only one spouse actually writes the check. In 2027 that turns the $20,000 individual exclusion into $40,000 per recipient, up from $38,000 in 2026. Gift splitting is not automatic; both spouses have to consent to it, and the election is made by filing Form 709, the gift tax return, for the year in question, even if no tax ends up being owed.
Do gifts above the annual exclusion always trigger gift tax?
No, and this is the point most people misunderstand. A gift above the annual exclusion to one recipient in one year requires filing Form 709, but it usually just uses up part of the giver's lifetime gift and estate tax exemption rather than triggering an actual tax bill. That lifetime exemption is a separate, much larger number, projected well into eight figures for 2027, and actual gift tax is only owed once a person's cumulative lifetime gifts exceed it. Filing the return is the compliance step; owing tax is a different, later threshold.
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