IRS Announces Bigger Estate and Gift Tax Exemption for 2027, Raising the Threshold to $15.48M

Wealthy American families will be able to shield an additional $480,000 (€429,914 and £358,613) per person from federal estate and gift tax in 2027 after the Internal Revenue Service raised the basic exclusion amount to $15.48 million (€13.86 million and £11.57 million).

Announced on 5 November, the adjustment applies to estates of people who die during 2027 and qualifying gifts made during that calendar year.

The exemption increases from $15 million (€13.43 million and £11.21 million) in 2026. Each spouse has an individual exclusion, potentially giving married couples a combined $30.96 million (€27.73 million and £23.13 million), provided applicable requirements are met and neither has already used their available allowance.

A surviving spouse may need to make a portability election to use a deceased spouse's unused exclusion.

What the IRS Changed for 2027

The announcement covers almost 70 tax provisions for 2027, including income tax brackets, standard deductions and tax credits. Most changes will affect returns filed in 2028.

The annual gift tax exclusion increases to $20,000 (€17,913 and £14,942) per recipient, up from $19,000 (€17,017 and £14,195) in 2026. Qualifying gifts within this limit generally do not count towards the donor's lifetime exclusion.

For gifts to a spouse who is not a US citizen, the special annual exclusion increases to $201,000 (€180,027 and £150,169), from $194,000 (€173,757 and £144,940).

Tax Benefits for Different Households

The standard deduction for married couples filing jointly rises to $33,200 (€29,736 and £24,804), an increase of $1,000 (€896 and £747).

Single filers and married individuals filing separately will receive a $16,600 (€14,868 and £12,402) standard deduction, while heads of households will qualify for $24,925 (€22,324 and £18,622).

The maximum child tax credit increases by $100 to $2,300 (€2,060 and £1,718) per qualifying child. Its maximum refundable portion rises to $1,800 (€1,612 and £1,345).

IRS Chief Executive Officer Frank J. Bisignano said hardworking American taxpayers would continue benefiting from the Working Families Tax Cuts, with increased credits and deductions.

Tax Brackets Move Higher With Inflation

The top federal income tax rate remains 37%, applying to taxable income above $661,375 (€593,253 and £495,370) for single filers and $793,650 (€711,904 and £594,444) for married couples filing jointly.

The other marginal rates remain 35%, 32%, 24%, 22% and 12%, with the lowest 10% rate applying to income of $12,800 €11,482 and £9,587) or less for single filers and $25,600 (€22,963 and £19,174) or less for married couples filing jointly.

These are inflation adjustments rather than across-the-board tax cuts. They help prevent taxpayers whose nominal earnings increase with inflation from moving into higher tax brackets without gaining purchasing power.

Other Key 2027 Tax Changes

The maximum earned income tax credit rises to $8,496 (€7,609 and £6,347) for qualifying taxpayers with at least three children, up from $8,231 (€7,372 and £6,149).

The maximum adoption credit increases to $18,250 (€16,346 and £13,635), with up to $5,280 (€4,729 and £3,945) potentially refundable.

Health flexible spending account contributions rise to $3,500 (€3,135 and £2,615). Where employer plans permit unused funds to carry over, the maximum increases to $700 (€627 and £523).

Businesses also benefit from higher Section 179 expensing limits, which increase to $2.64 million (€2.36 million and £1.97 million). The sport utility vehicle limit rises to $33,100 (€29,646 and £24,729).

Who Actually Pays Estate Tax?

The higher exemption primarily benefits families with substantial wealth. However, it does not eliminate every potential tax liability. Some states impose separate estate or inheritance taxes, potentially at lower exemption levels.

The IRS also confirmed that personal exemptions remain at zero for 2027, while Lifetime Learning Credit phase-out thresholds remain unchanged.

For households planning gifts, the increased annual exclusion provides greater flexibility. For estate planning, the higher federal basic exclusion amount offers additional protection, although previous taxable gifts and applicable tax rules remain important considerations.