2018 GST Exemption
The 2018 GST Exemption is $11,180,000.
Effective 2018-01-01Source: 2018 Instructions for Form 709 (IRS)Verified 2026-08-29
Compared with 2017
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Lifetime GST exemption | $5,490,000 | $11,180,000 | +$5,690,000 (+103.6%) |
Who it applies to
Donors who make generation-skipping transfers subject to the federal gift and GST taxes and who file IRS Form 709 to allocate their lifetime GST exemption.
What changed this year, and why
For 2018, the lifetime GST exemption is $11,180,000 per donor. This amount, set by the IRS, represents the total exemption each individual may allocate during life to generation-skipping transfers reported on Form 709.
Common questions
- What is the GST exemption used for?
- The GST (generation-skipping transfer) exemption is a lifetime amount a donor can use to shield transfers to skip persons (such as grandchildren) from the federal GST tax. Each donor may allocate up to the full exemption amount across their lifetime.
- Is the GST exemption separate from the gift and estate tax exemption?
- No. The $11,180,000 is a single lifetime amount shared with the gift and estate tax exclusion. Once any portion is used during life, less remains available for estate-tax purposes.
Which transfers the GST tax reaches
The GST tax applies only to a specific kind of transfer called an "inter vivos direct skip," which is a gift made while the donor is alive. For such a transfer to be subject to the GST tax, it must meet all three of the following conditions: it must be subject to the federal gift tax (meaning it is required to be listed on Schedule A of Form 709), it must involve an interest in property, and it must be made to a "skip person" - someone who is two or more generations below the donor, such as a grandchild. Transfers that take effect at death (testamentary direct skips) and taxable distributions or taxable terminations from trusts are subject to the GST tax under different rules and are not reported on Form 709. The donor’s lifetime GST exemption - $11,180,000 for 2018 - can be applied to these inter vivos direct skips to shelter them from the tax.
The GST tax you must report on Form 709 is that imposed only on inter vivos direct skips. An inter vivos direct skip is a transfer that is: • Subject to the gift tax, • Of an interest in property, and • Made to a skip person.
2018 Instructions for Form 709 (IRS)
The exemption allocates itself to direct skips unless you elect out
When a donor makes an inter vivos direct skip - a lifetime transfer to a skip person that is subject to gift tax - the IRS does not require the donor to file a separate form specifically allocating GST exemption to that transfer. Instead, the system automatically applies a portion of the donor's unused GST exemption to the transferred property. The automatic allocation uses whatever exemption the donor has not yet applied to other transfers. The automatic allocation applies unless the donor affirmatively elects out of it. To elect out, the donor must file Form 709 and attach a statement that clearly describes the transaction and states the extent to which the automatic allocation should not apply. There is also a way to prevent automatic allocation by reporting the direct skip on a timely filed Form 709 and paying the GST tax on the transfer. The lifetime GST exemption for 2018 is $11,180,000.
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.
2018 Instructions for Form 709 (IRS)
Allocating the exemption is a one-way decision
Once you apply your GST exemption to a transfer - whether automatically by the system or by an affirmative allocation on a tax return - you cannot undo that decision. The rule states plainly that an allocation is irrevocable. This means you cannot later reclaim exemption that you have already used, reallocate it to a different transfer, or change the amount you assigned. The decision is final as of the moment the allocation takes effect. Because of this rule, donors should be deliberate when deciding how much of their $11,180,000 lifetime GST exemption to apply to any given transfer. You should consider not only the current transfer but also future transfers you may wish to shelter, since any exemption used now reduces what remains available later.
The executor can apply the exemption on Form 706 to transfers taking effect at death. An allocation is irrevocable.
2018 Instructions for Form 709 (IRS)
Allocating to a transfer not reported on this return
If you want to allocate GST exemption to a transfer that is not reported on the Form 709 you are currently filing - such as a transfer reported on a prior year's return or a late allocation - you cannot do so by simply filling in a box on the form. Instead, you must attach a separate statement to Form 709 and title it "Notice of Allocation." The notice must include, for each trust or transfer involved: clear identification of the trust (including its EIN if known), the year the transfer was originally reported if this is a late allocation, the value of the trust assets at the effective date of the allocation, the amount of GST exemption you are allocating to each gift (or a statement that you are allocating exemption by a formula such as "an amount necessary to produce an inclusion ratio of zero"), and the inclusion ratio of the trust after the allocation. You then total all the exemption allocations shown on the notice and enter the sum on line 6 of Part 2 of Form 709.
To allocate your exemption to such transfers, attach a statement to this Form 709 and entitle it “Notice of Allocation.”
2018 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.
2018 Instructions for Form 709 (IRS)
- Lifetime GST exemption
Every donor is allowed a lifetime GST exemption. The amount of the exemption for 2018 is $11,180,000.