2025 gift tax exclusion and estate tax exemption, in the last year before a scheduled cut
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2025 was supposed to be the last year of a doubled estate tax exemption before it was cut roughly in half on schedule — then a law signed in July 2025 raised it further instead. Here is exactly what applied in 2025, and why the timing mattered.
For 2025, you can give up to $19,000 to any number of people with no gift tax return required, and an estate can pass up to $13,990,000 per person free of federal estate tax. Both figures matter on their own, and they matter together: 2025 was supposed to be the final year of a doubled exemption before it was cut roughly in half on schedule at the end of the year. A law signed in July 2025 changed that outcome, but only for 2026 onward — the $13,990,000 figure is what actually applied for anyone who died, or gave a large gift, during 2025 itself.
The annual gift tax exclusion
The annual exclusion lets you give up to $19,000 to any one person in 2025 — to as many different people as you like — without filing a gift tax return or using any of your lifetime exemption. A married couple can combine exclusions to give $38,000 to one recipient without a return, through a mechanism called gift-splitting. The figure rose from $18,000 in 2024, confirmed by the IRS's 2025 inflation-adjustment announcement. Only the amount given to one person above $19,000 in a calendar year requires a Form 709 gift tax return — and even then, no tax is usually owed, because the excess simply reduces your lifetime exemption rather than triggering an immediate bill.
A separate, larger exclusion for a non-citizen spouse
Gifts between spouses who are both US citizens are unlimited and untaxed under the marital deduction. That deduction does not apply without limit if the recipient spouse is not a US citizen, so a separate, higher annual exclusion exists instead: $190,000 for 2025, confirmed directly in Revenue Procedure 2024-40. A gift to a non-citizen spouse above that figure in a single year starts using the giver's lifetime exemption, the same as a gift to anyone else above the ordinary $19,000 exclusion.
The estate and gift tax basic exclusion amount
Separate from the annual exclusion, every individual has a lifetime basic exclusion amount — $13,990,000 for 2025 — that covers both gifts made during life above the annual exclusion and property transferred at death, combined into a single running total. Give away $3,000,000 above annual exclusions during your lifetime and $10,990,000 remains available to shelter your estate when you die. The 2025 figure is up from $13,610,000 in 2024, and the top rate on transfers above the exemption is 40%, confirmed in the IRS's instructions for Form 706. The generation-skipping transfer tax, which applies to gifts and bequests to grandchildren or more remote descendants, carries its own exemption set at the same $13,990,000 figure.
Portability lets a married couple combine exemptions
A surviving spouse can claim any unused portion of a deceased spouse's exclusion, a mechanism called portability, bringing a married couple's combined shelter to $27,980,000 for 2025. Portability is not automatic — it requires filing an estate tax return (Form 706) for the first spouse to die within the deadline, even when the estate is well under the exemption and no tax is owed, purely to preserve the unused amount for later. Skipping that filing because "no tax is due anyway" is one of the more common ways a surviving spouse permanently loses access to the first spouse's unused exemption.
Portability only carries forward the dollar amount unused at the first spouse's death — it does not grow with inflation the way an untouched exemption does. A surviving spouse who remarries and outlives a second spouse can only ever use the most recently deceased spouse's unused amount, not a combination from two prior marriages, which is worth knowing before assuming an earlier portability election is still available years later.
The cut that 2025 was scheduled for, and didn't get
The doubled exemption dates to the 2017 Tax Cuts and Jobs Act, which roughly doubled the prior limit starting in 2018 but wrote in an expiration: without further legislation, the exemption was due to revert to pre-2018 levels, roughly half its 2025 size, for anyone dying in 2026 or later. The One Big Beautiful Bill Act, signed July 4, 2025, canceled that scheduled reversion. Instead of falling, the exemption rose again for 2026, to $15,000,000 per person, and the increase is permanent rather than temporary — confirmed by the same IRS 2026 announcement that restates the $13,990,000 2025 figure for comparison. None of this changed what applied to anyone who died, or gave a large gift, during 2025 itself — the $13,990,000 exemption is what governs those events regardless of what happened to the law afterward.
Why the exact year matters, in dollars
Take an estate worth $16,000,000 at death, with no surviving spouse and no prior taxable gifts, taxed at the flat 40% top rate on the amount above the exemption:
| Year of death | Exemption | Taxable amount | Estate tax owed |
|---|---|---|---|
| 2025 | $13,990,000 | $2,010,000 | $804,000 |
| 2026 | $15,000,000 | $1,000,000 | $400,000 |
Identical estate, $404,000 less tax simply from the exemption moving between the two years — nothing about the estate itself changed. This is presented purely to show how much a single year's exemption figure can move the result on a large estate; it says nothing about when any individual is likely to die, and estate size and composition vary far more than this simplified example.
What to check before assuming last year's numbers apply
- Confirm whether a gift you made in 2025 exceeded $19,000 to one recipient — if so, a Form 709 gift tax return is generally required even though tax is rarely owed immediately.
- If a spouse died in 2025, check whether a Form 706 was filed to elect portability, even if the estate owed no tax — the deadline to preserve that unused exemption is strict.
- Many states charge their own separate estate or inheritance tax with a far lower exemption than the federal figure; none of the numbers above say anything about state liability.
- The 2026 exemption is a different, larger number than the one that applied in 2025 — do not carry the $13,990,000 figure forward when estimating a 2026 or later event.
Sources
- IRS: Tax inflation adjustments for tax year 2025
- IRS: Revenue Procedure 2024-40
- IRS: Instructions for Form 706
- IRS: Tax inflation adjustments for tax year 2026, including amendments from the One Big Beautiful Bill
This is general information, not tax, legal or estate planning advice. It covers federal gift and estate tax only; state-level estate and inheritance taxes, and the specific structure of any estate, can change the result substantially. For a decision about your own estate or a specific gift, consult a licensed estate planning attorney or tax professional.