The 2027 Estate and Gift Tax Changes, Explained

When the IRS released its 2027 inflation adjustments, two numbers got the headlines: the estate tax exclusion rose to $15.48 million, and the annual gift exclusion rose to $20,000. Most people skimmed past both, assuming estate planning is a rich-person problem.

That assumption is half right — and half a costly mistake. The estate exemption is a rich-person number. The gift exclusion is not. Here's what actually changed, and which of it applies to you.

The Estate Tax Exclusion: $15.48 Million

For people who die in 2027, the basic exclusion from federal estate tax is $15,480,000 per person — up from $15 million. A married couple can shelter $30.96 million combined, and the same $15.48 million figure sets the generation-skipping transfer tax exemption.

Let's be honest about who this affects: a very small slice of households. But it's not zero, and it sneaks up on people more than you'd think. A successful small-business owner, a family that bought a house decades ago in an appreciating market, a concentrated stock position that compounded for 30 years — a $15 million estate is reachable, and 17 states tax estates at thresholds far below the federal number. Our Estate Tax & Gifting Planner shows your exposure at both levels in about a minute.

The Gift Exclusion: $20,000 — This Is the One That Matters

The annual gift tax exclusion rises to $20,000 per recipient in 2027, up from $19,000. That means a married couple can give $40,000 per year to each child or grandchild — or anyone — without filing a gift tax return and without touching the lifetime exemption.

Here's why this matters for ordinary families: the annual exclusion is a completely separate track from the estate tax. You don't need a $15 million estate to benefit. Every dollar you gift under the annual exclusion moves out of your estate forever, tax-free, with no paperwork. For a family that plans to leave money anyway, gifting $20,000 a year now is simply the same transfer done early — and done without it counting against anything.

The distinction people miss: the annual exclusion is the $20,000-per-person amount you can give every year with no consequences. The lifetime exemption is the $15.48 million that any gift above the annual amount chips away at. The annual exclusion is the one you should be using every year you're able.

QSBS: The Founder's Big Surprise

The change most people haven't heard about is buried in the fine print — and it's the biggest deal for a narrow group: qualified small business stock (QSBS) got indexed for the first time ever.

In 2027, founders and early employees can exclude up to $15,480,000 of gain on qualifying small business stock, and the gross-asset ceiling for a qualifying company rises to $77,390,000. Previously these were fixed dollar amounts; now they adjust for inflation like everything else.

If you're a founder or early employee planning an exit in the next few years, re-run your numbers. The amount of gain you can exclude just moved — potentially by hundreds of thousands of dollars, tax-free.

The 37% Bracket and the Itemized-Deduction Cap

One more 2025-law wrinkle: a cap now limits the benefit of itemized deductions for taxpayers in the 37% bracket. If your income has grown into the top bracket, the timing of large charitable gifts changes — bunching several years of giving into one can beat spreading it out, because the deduction is worth more in the year you bunch it.

This is exactly the kind of thing that shows up in year-end tax moves — the kind you model, not guess.

What to Do Before Year-End

1. If you're above the estate-tax concern line, run your exposure now that the exemption is $15.48 million — and remember growth compounds the problem over a decade.
2. If you were going to gift anyway, do it before December 31 to use this year's $20,000 limit. Gifts are use-it-or-lose-it each year.
3. If you're a founder or QSBS holder, recheck your exit math against the new indexed cap.
4. If you're newly in the 37% bracket, reconsider the timing of charitable gifts under the new itemized-deduction cap.

The Bottom Line

The 2027 estate and gift changes are two different stories. The estate exemption moved a little, and it still only matters to a sliver of households. The gift exclusion moved a little too — and it matters to everyone who plans to leave money to family.

Use the annual exclusion every year you can. It's the most underused, paperwork-free tax break available to ordinary people.