Definition
The annual gift tax exclusion lets a donor give up to a set amount per recipient each year without using lifetime exemption.
How It Works
For 2026, the annual gift tax exclusion is $19,000 per recipient.
Example
A couple gives the combined annual exclusion amount to each of their children and grandchildren every year, steadily moving wealth out of their estate tax-free.
When It Works Best
It works best as a consistent, multi-year strategy to reduce a taxable estate gradually.
Who It Applies To
Anyone wishing to transfer wealth to others, especially those with potential estate tax exposure.
Watch-Outs
Gifts above the exclusion require filing a gift tax return and use lifetime exemption, though tax is usually not owed until the lifetime exemption is exhausted.
