2023 GST Exemption
The 2023 GST Exemption is $12,920,000.
Effective 2023-01-01Source: 2023 Instructions for Form 709 (IRS)Verified 2026-08-29
Compared with 2022
| Item | 2022 | 2023 | Change |
|---|---|---|---|
| Lifetime GST exemption | $12,060,000 | $12,920,000 | +$860,000 (+7.1%) |
Who it applies to
Donors who make gifts or other transfers that skip a generation (for example, to a grandchild or to a trust that benefits grandchildren), as well as estates subject to the generation-skipping transfer tax.
What changed this year, and why
For 2023, the lifetime generation-skipping transfer (GST) exemption is $12,920,000 per donor. A donor may allocate all or any part of this exemption to property transferred during the donor's lifetime, or it may be applied at death. The GST exemption shelters qualifying transfers from the federal generation-skipping transfer tax.
Common questions
- How is the GST exemption allocated?
- A donor may allocate all or part of the lifetime GST exemption to property transferred during the donor's lifetime, typically by reporting the allocation on Schedule D, Part 2 of IRS Form 709.
- Can the GST exemption be used together with the annual gift exclusion?
- The lifetime GST exemption is separate from the gift-tax annual exclusion. A transfer that is smaller than the annual exclusion can still be a generation-skipping transfer for which a donor may wish to allocate GST exemption.
Which transfers the GST tax reaches
The generation-skipping transfer (GST) tax, as reported on Form 709, applies only to a specific category called an inter vivos direct skip. An inter vivos direct skip is a gift made during the donor's lifetime that meets three requirements at the same time: 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 the recipient must be a skip person - someone who is two or more generations below the donor, such as a grandchild. All three conditions must be satisfied; if any one is missing, the transfer is not subject to the GST tax on this return. Certain transfers, such as those to political organizations, exempt organizations, and gifts that qualify for the medical or educational exclusions, are generally not subject to the gift tax and therefore fall outside the GST tax as well. Transfers to trusts that are not subject to gift tax may still become subject to the GST tax at a later date, so donors sometimes choose to allocate exemption even when no immediate tax is due.
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. All three requirements must be met before the gift is subject to the GST tax.
2023 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, the IRS does not wait for the donor to affirmatively allocate exemption. Instead, a portion of the donor's unused GST exemption is automatically applied to the property transferred, unless the donor takes steps to prevent it. To opt out of this automatic allocation, 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. Additionally, simply reporting the direct skip on a timely filed Form 709 and paying any GST tax due on the transfer is itself enough to block the automatic allocation. This mechanism is important because automatic allocation uses up part of the donor's lifetime exemption, which for 2023 is $12,920,000, and once used it may not be available for other transfers or for estate tax purposes. Donors who wish to preserve their exemption for other planning purposes must affirmatively elect out on a timely filed return.
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. To elect out of the automatic allocation of exemption, you must file Form 709 and attach a statement to it clearly describing the transaction and the extent to which the automatic allocation is not to apply. Reporting a direct skip on a timely filed Form 709 and paying the GST tax on the transfer will prevent an automatic allocation.
2023 Instructions for Form 709 (IRS)
Allocating the exemption is a one-way decision
Once a donor allocates GST exemption to a particular transfer, that decision is final. The IRS does not permit a donor to undo, reduce, or reassign the exemption after the allocation has been made, even if circumstances change or a more advantageous use of the exemption later becomes apparent. This one-way rule applies whether the exemption was allocated affirmatively on a timely filed Form 709, allocated automatically to an inter vivos direct skip, or allocated by the executor on a federal estate tax return. Because the lifetime GST exemption for 2023 is $12,920,000 and every dollar allocated reduces the amount available for future transfers or for use at death, donors should carefully consider which transfers are most likely to appreciate and which beneficiaries are most likely to trigger a taxable distribution before committing exemption. Careful planning and timely filing are essential, since there is no mechanism to reverse an allocation once the return is submitted.
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.
2023 Instructions for Form 709 (IRS)
Allocating to a transfer not reported on this return
A donor may wish to allocate GST exemption to a trust or other transfer that does not appear on the current year's Form 709, such as when making a late allocation to a prior-year transfer. To do this, the donor attaches a statement to the Form 709 being filed and titles it "Notice of Allocation." The notice must contain specific information for each trust or transfer involved: clear identification of the trust (including its employer identification number if known); if the allocation is late, the year the original transfer was reported on Form 709; the value of the trust assets as of the effective date of the allocation; the amount of GST exemption being allocated to each gift, or a statement that exemption is being allocated by a formula (such as "an amount necessary to produce an inclusion ratio of zero"); and the resulting inclusion ratio of the trust after the allocation is applied. The total of all exemption allocations shown in the notice is then entered on line 6 of Part 2 of Schedule D. This procedure allows donors to apply exemption retroactively or to transfers that fall outside the normal reporting cycle.
Notice of Allocation. 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.” The notice must contain the following for each trust (or other transfer). • Clear identification of the trust, including the trust's EIN, if known. • If this is 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 your GST exemption allocated to each gift (or a statement that you are allocating exemption by means of a formula such as “an amount necessary to produce an inclusion ratio of zero”). • The inclusion ratio of the trust after the allocation.
2023 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.
2023 Instructions for Form 709 (IRS)
- Lifetime GST exemption
Every donor is allowed a lifetime GST exemption. The amount of the exemption for 2023 is $12,920,000.