2017 GST Exemption
For 2017, the GST Exemption figures are $5,490,000 (Lifetime GST exemption) and 40% (Top GST tax rate).
Effective 2017-01-01Source: 2017 Instructions for Form 709 (IRS)Verified 2026-09-03
Compared with 2016
| Item | 2016 | 2017 | Change |
|---|---|---|---|
| Lifetime GST exemption | $5,450,000 | $5,490,000 | +$40,000 (+0.7%) |
| Top GST tax rate | 40% | 40% | +0% (+0.0%) |
Who it applies to
Taxpayers who make gifts or transfers subject to the generation-skipping transfer tax and file Form 709 for calendar year 2017.
What changed this year, and why
The lifetime generation-skipping transfer (GST) exemption increased to $5,490,000 for 2017.
Common questions
- What is the lifetime GST exemption?
- The lifetime GST exemption is the maximum amount of property that a transferor can shield from the federal generation-skipping transfer tax over the course of their life. It is applied to direct skips, taxable distributions, and taxable terminations involving skip persons.
- Did the GST exemption change from 2016 to 2017?
- Yes. For 2016 the lifetime GST exemption was $5,450,000. For 2017 it rose to $5,490,000.
Which transfers the GST tax reaches
The GST tax applies only to inter vivos direct skips, which are transfers made during the donor's lifetime. For a transfer to be subject to the GST tax, it must meet three requirements: it must be subject to the gift tax, it must be of an interest in property, and it must be made to a skip person. A transfer is considered subject to the gift tax if it must be reported on Schedule A of Form 709. This excludes certain transfers such as those made to political organizations, transfers to certain exempt organizations, transfers qualifying for medical or educational exclusions, transfers fully excluded under the annual exclusion, and most transfers made to a spouse. The lifetime GST exemption for 2017 is $5,490,000, which can be applied to these transfers to reduce or eliminate the GST tax liability.
An inter vivos direct skip is a transfer made during the donor's lifetime that is: Subject to the gift tax, Of an interest in property, and Made to a skip person.
2017 Instructions for Form 709 (IRS)
The exemption allocates itself to direct skips unless you elect out
For inter vivos direct skips, a portion of the donor's unused GST exemption is automatically allocated to the transferred property unless the donor elects otherwise. To elect out of this automatic allocation, the donor must file Form 709 and attach a statement clearly describing the transaction and the extent to which the automatic allocation should not apply. Alternatively, reporting a direct skip on a timely filed Form 709 and paying the GST tax on the transfer will also prevent the automatic allocation. The lifetime GST exemption for 2017 is $5,490,000, and the automatic allocation mechanism applies this exemption to direct skips unless the donor takes affirmative action to opt out.
In the case of inter vivos direct skips, a portion of the donor's unused exemption is automatically allocated to the transferred property unless the donor elects otherwise.
2017 Instructions for Form 709 (IRS)
Allocating the exemption is a one-way decision
Once a donor allocates GST exemption to a transfer, that allocation cannot be undone or changed. The donor can apply the exemption to inter vivos transfers on Form 709, or the executor can apply it on Form 706 to transfers taking effect at death, but once the allocation is made, it is final. This means donors and executors must carefully consider how much of their $5,490,000 lifetime GST exemption to allocate to each transfer, as they cannot later increase or decrease the allocation amount.
The executor can apply the exemption on Form 706 to transfers taking effect at death. An allocation is irrevocable.
2017 Instructions for Form 709 (IRS)
Allocating to a transfer not reported on this return
When you want to allocate GST exemption to transfers not reported on the current Form 709, such as late allocations, you must attach a statement entitled "Notice of Allocation." The notice must contain specific information for each trust or transfer: clear identification of the trust including its EIN if known; if it's a late allocation, the year the transfer was reported on Form 709; the value of the trust assets at the effective date of the allocation; the amount of GST exemption allocated to each gift or a statement that you are allocating exemption by formula such as "an amount necessary to produce an inclusion ratio of zero"; and the inclusion ratio of the trust after the allocation. You must total all exemption allocations and enter the total on line 6.
You may wish to allocate GST exemption to transfers not reported on this return, such as a late allocation. To allocate your exemption to such transfers, attach a statement to this Form 709 and entitle it “Notice of Allocation.”
2017 Instructions for Form 709 (IRS)
A donor uses it during life, an executor uses it at death
For the 2017 federal generation-skipping transfer (GST) tax, the lifetime GST exemption is $5,490,000. A donor may apply this exemption during life to inter vivos transfers by filing Form 709, while an executor may apply it at death to transfers taking effect at death by filing Form 706. Once allocated, the exemption election is irrevocable. For inter vivos direct skips, a portion of the donor's unused GST exemption is automatically allocated to the transferred property unless the donor elects otherwise.
The donor can apply this exemption to inter vivos transfers (that is, transfers made during the donor's life) on Form 709. The executor can apply the exemption on Form 706 to transfers taking effect at death. An allocation is irrevocable.
2017 Instructions for Form 709 (IRS)
A gift under the annual exclusion is not automatically safe from GST tax
For the 2017 federal generation-skipping transfer (GST) tax, the lifetime GST exemption is $5,490,000. Certain transfers, particularly transfers to a trust, that are not subject to gift tax and are therefore not subject to the GST tax on Form 709 may be subject to the GST tax at a later date. This is true even if the transfer is less than the $14,000 federal annual exclusion amount for 2017. Because the transfer escapes immediate GST taxation, it can later trigger GST tax when a distribution is made from the trust to a skip person or when a skip person's interest in the trust terminates. A donor who wants to prevent that future tax can proactively allocate a portion of the $5,490,000 lifetime GST exemption to the transfer, either on Form 709 for the year of the gift or on a separate Notice of Allocation filed later. Without such an allocation, the trust's inclusion ratio remains greater than zero, and GST tax may be due when the later taxable event occurs.
Certain transfers, particularly transfers to a trust, that are not subject to gift tax and are therefore not subject to the GST tax onCAUTION ! Form 709 may be subject to the GST tax at a later date. This is true even if the transfer is less than the $14,000 annual exclusion.
2017 Instructions for Form 709 (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
2017 Instructions for Form 709 (IRS)
- Lifetime GST exemption
Every donor is allowed a lifetime GST exemption. The amount of the exemption for 2017 is $5,490,000.
- Top GST tax rate
The top rate for gifts and generation- skipping transfers remains at 40%.