IRS Increases 2027 Estate and Gift Tax Exemption to $15.48 Million
The IRS adjusts tax thresholds for 2027 to account for inflation across multiple provisions.
1New Estate Tax Thresholds
The Internal Revenue Service announced that the federal estate and gift tax exemption will rise to $15.48 million per person in 2027. This represents a $480,000 increase from the 2026 limit of $15 million. These adjustments apply specifically to the estates of individuals who pass away during the 2027 calendar year.
2Married Couples and Portability
Married couples can potentially shield a combined $30.96 million from federal taxes, provided they meet all regulatory requirements. Each spouse maintains an individual exclusion allowance. If one spouse does not utilize their full exemption, the surviving spouse may need to file a portability election to transfer the remaining unused portion to their own.
3Annual Gift Tax Adjustments
The annual gift tax exclusion per recipient increases to $20,000 for 2027, up from $19,000 in 2026. Qualifying gifts under this threshold do not count against the donor's lifetime exclusion limit. Additionally, the special annual exclusion for gifts made to a non-citizen spouse rises significantly to $201,000, providing greater flexibility for international estate planning.
4Standard Deductions and Credits
Standard deductions for married couples filing jointly will increase to $33,200, a $1,000 rise from previous levels. Single filers will see their deduction set at $16,600. Furthermore, the maximum child tax credit increases by $100 to $2,300 per qualifying child, with the maximum refundable portion of this credit rising to $1,800.
5Inflation-Linked Tax Brackets
The top federal income tax rate remains at 37%, applicable to income exceeding $661,375 for single filers. These adjustments are designed to prevent bracket creep, where nominal earnings growth due to inflation pushes taxpayers into higher tax brackets without increasing their actual purchasing power. Marginal rates from 10% to 35% remain unchanged.
6Broad Tax Provision Updates
The IRS updated nearly 70 tax provisions for 2027, including earned income tax credits and adoption credits. The maximum earned income tax credit for taxpayers with three or more children rises to $8,496. Meanwhile, the maximum adoption credit increases to $18,250, with a portion of this amount remaining refundable for eligible families.
7Business and Health Benefits
Health flexible spending account contributions will increase to $3,500, with carry-over limits reaching $700 where employer plans permit. Businesses also see higher Section 179 expensing limits, now at $2.64 million. Additionally, the tax deduction limit for sport utility vehicles used for business purposes has been adjusted upward to $33,100 for the year.
8Strategic Planning Implications
While the higher federal exemption benefits wealthy households, taxpayers must remain aware of state-level estate or inheritance taxes which may have lower thresholds. These adjustments provide significant planning opportunities, but previous taxable gifts and specific tax rules remain critical factors. Taxpayers should consult professionals to navigate these complex, inflation-adjusted federal tax changes.