New for 2026: Estate and Gift Tax Exemptions

The federal estate and gift tax exemption changes from year to year, and prior to the passing of the One Big Beautiful Bill (OBBB), there was concern that the high exemption amount would “sunset” and be greatly reduced in 2026. Under the OBBB, the combined federal estate and gift tax exemption amount did not sunset and is $15 million per person ($30 million per married couple) as of January 1, 2026, to be adjusted each year for inflation.

This exemption amount applies to the total taxable gifts made during an individual’s lifetime and the value of property transferred at death to someone other than a spouse or charity. Once the gifts combined with transfers at death exceed the exemption amount, a federal tax of 40% will be imposed on the excess.

The higher exemption amount is said to be “permanent,” but permanent in the law means it’s there until Congress changes it.

Worldwide, there is much greater interest in taxing the “rich” by means of estate and or income taxes. This suggests that one may wish to consider taking advantage of the high estate and gift tax exemption amounts while they are in force.

Even if the exemption amount does not decrease, if you have significant assets, you may still wish to take advantage of the higher exemption amount by gifting assets sooner rather than later, as the appreciation on those gifted assets will escape estate taxation at your death. Federal and New York capital gains tax consequences of making gifts must be considered, however, as the donee receives the gifted assets with your income tax basis. Estate and income tax consequences must be weighed against each other when considering making gifts.

New York has its own separate estate tax system, with the estate exemption for 2026 set at $7.35 million per person. While there is no New York State gift tax, New York adds back to your taxable estate all taxable gifts you made during the three-year period immediately preceding your death. This may also prompt you to make gifts sooner rather than later, in order to reduce the value of your estate at death for New York estate tax purposes.

This article appeared in the January 2026 issue of Stroll Lloyd Harbor.