What is the generation-skipping transfer tax rate for 2025?

The federal generation-skipping transfer (GST) tax rate for 2025 is a flat 40%, the same as the top federal estate and gift tax rate. This rate applies to all direct skips, taxable distributions, and taxable terminations that exceed the available GST exemption amount.

What is the GST tax exemption amount for 2025?

The federal GST exemption for 2025 is $13,990,000 per individual (up from $13,610,000 in 2024 due to inflation adjustment). Married couples can combine exemptions for a total of $27,980,000. This exemption is unified with the federal estate and gift tax exemption. The exemption is scheduled to revert to approximately $7,000,000 per person (inflation-adjusted) after December 31, 2025 unless Congress acts.

Who is considered a skip person for GST tax purposes?

A skip person is any individual who is two or more generations below the transferor. This typically includes grandchildren, great-grandchildren, and more remote descendants. It also includes unrelated individuals who are more than 37.5 years younger than the transferor. Trusts can also be skip persons if all interests in the trust are held by skip persons.

What is the difference between a direct skip, taxable distribution, and taxable termination?

A direct skip is a transfer made directly to a skip person (e.g., gifting money to a grandchild). A taxable distribution occurs when assets are distributed from a trust to a skip person beneficiary. A taxable termination happens when a non-skip person's interest in a trust terminates and all remaining interests are held by skip persons. Each type triggers different GST tax reporting and payment responsibilities.

How do I calculate generation-skipping transfer tax?

To calculate GST tax: (1) Determine the taxable amount of the transfer; (2) Subtract any available GST exemption you allocate to the transfer; (3) Multiply the remaining taxable amount by the 40% flat GST tax rate. For direct skips, the GST tax is in addition to any gift or estate tax owed. Use our calculator above for an instant estimate.

Can I avoid generation-skipping tax with a dynasty trust?

Yes. A dynasty trust is specifically designed to minimize or eliminate GST tax across multiple generations. By funding a dynasty trust with your entire GST exemption (up to $13,990,000 in 2025), all assets in the trust — plus all future growth — can pass to grandchildren, great-grandchildren, and beyond without incurring GST tax. States with no rule against perpetuities (like South Dakota, Nevada, and Delaware) are popular dynasty trust jurisdictions.

Is the annual gift tax exclusion also exempt from GST tax?

Gifts that qualify for the annual gift tax exclusion ($18,000 per recipient in 2024; $19,000 in 2025) are also generally excluded from GST tax when made as direct skips to individuals. However, gifts to trusts that benefit skip persons do not automatically qualify — the trust must meet specific requirements (Crummey powers, etc.) for the annual exclusion to apply for GST purposes.

What happens to the GST exemption after 2025 sunset?

The Tax Cuts and Jobs Act of 2017 doubled the GST and estate tax exemptions. These provisions are set to sunset on December 31, 2025, potentially cutting the exemption to roughly $7,000,000 per person (inflation-adjusted). Transfers made before the sunset using the higher exemption are not clawed back — meaning 2025 is a critical planning window for high-net-worth families to make large GST-exempt transfers.

Who pays the generation-skipping transfer tax?

For direct skips, the transferor (the donor) is responsible for paying the GST tax. For taxable distributions, the recipient (the skip person) pays. For taxable terminations, the trustee pays the GST tax from trust assets. The tax is reported on IRS Form 709 (for lifetime transfers) or Form 706 (for transfers at death).

Generation-Skipping Tax Calculator 2025 — GST Tax Estimator

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GST Tax Calculator — 2025 Federal Rates

⚠️ 2025 Planning Window: The enhanced GST exemption of $13,990,000 per person is scheduled to sunset December 31, 2025. Large GST-exempt transfers made before then are not clawed back. Consult an estate attorney immediately if your estate exceeds $7,000,000.

Transfer Amount (total value being transferred)

Please enter a transfer amount greater than $0.

GST Exemption Applied (amount you're allocating)

Exemption cannot exceed the 2025 maximum of $13,990,000.

Transfer Type

Prior GST Exemption Used (lifetime, all prior years)

Estate / Gift Tax Also Owed on This Transfer?

Federal GST Tax Owed

on a $0 transfer after exemptions

📊 Transfer Breakdown

Total Transfer

Exemption Applied

Taxable Amount

GST Tax Rate

40%

Transfer Amount	$0
Less: GST Exemption Allocated	($0)
Taxable Amount for GST	$0
GST Tax Rate	40%
≈ Federal GST Tax	$0
Remaining Lifetime Exemption	$13,990,000

💡 Transfers to a properly structured dynasty trust can shield assets from GST tax for multiple generations. Allocate your exemption at the time of the gift to lock in today’s higher exemption amount.

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Sources & Methodology

Verified against IRS and official U.S. tax authority data. The GST tax rate, exemption thresholds, and calculation methodology used in this calculator are sourced directly from the Internal Revenue Code and IRS publications. All figures reflect 2025 inflation adjustments published by the IRS in Revenue Procedure 2024-40.

IRS — Instructions for Form 709 (2024)

Official IRS guidance for reporting generation-skipping transfers, GST tax calculation, and exemption allocation rules on gift tax returns.

irs.gov/forms-pubs/about-form-709

IRS Revenue Procedure 2024-40 — 2025 Inflation Adjustments

Official IRS announcement of the 2025 GST exemption amount of $13,990,000 per individual, the annual gift exclusion of $19,000, and related estate and gift tax figures.

irs.gov/pub/irs-drop/rp-24-40.pdf

Internal Revenue Code — Chapter 13 (Sections 2601–2664)

The statutory basis for the generation-skipping transfer tax, defining skip persons, taxable events (direct skips, taxable distributions, taxable terminations), and the 40% flat tax rate.

uscode.house.gov — Title 26 Subtitle B Chapter 13

🧮 Calculation Methodology

This calculator applies the following IRS-prescribed formula for GST tax on direct skips, taxable distributions, and taxable terminations:

          GST Tax = (Transfer Amount − GST Exemption Allocated) × 40%
        

Important notes:

The exemption applied is limited to your remaining lifetime GST exemption (total $13,990,000 minus prior years used).
For direct skips that are also subject to estate or gift tax, the GST tax calculation may use the “grossing up” method — consult an estate attorney for complex scenarios.
This calculator estimates federal GST only — some states have separate generation-skipping or inheritance taxes.

Last reviewed and verified: January 2025 — reflects IRS Rev. Proc. 2024-40 figures

Generation-Skipping Transfer Tax Explained: What It Is, How It Works, and How to Minimize It

The generation-skipping transfer (GST) tax is one of the most misunderstood taxes in the U.S. tax code. Enacted in 1986 to close a significant estate planning loophole, the GST tax imposes a flat 40% federal tax on transfers of wealth that skip one or more generations — for example, from a grandparent directly to a grandchild, bypassing the middle generation entirely. Without this tax, wealthy families could shelter assets from estate tax for decades by transferring them two or more generations down.

The good news is that most Americans will never owe GST tax. The 2025 federal GST exemption is $13,990,000 per individual ($27,980,000 for married couples), meaning only transfers above this threshold are subject to the 40% tax. However, with the current high exemption scheduled to sunset on December 31, 2025, 2025 is one of the most important estate planning years in recent memory for high-net-worth individuals.

What Is a Generation-Skipping Transfer?

A generation-skipping transfer is any transfer of property to a "skip person" — an individual who is two or more generations below the transferor. The most common example is a grandparent transferring assets to a grandchild. A non-family member more than 37.5 years younger than the transferor is also considered a skip person under IRS rules. The transfer can be made during life (as a gift) or at death (through a will or trust).

The Three Types of GST Taxable Events

The IRS recognizes three distinct types of events that trigger GST tax liability, each with different rules about who pays and how the tax is calculated:

📐 GST Tax Formula (All Transfer Types)

GST Tax = (Transfer Amount − GST Exemption Applied) × 40%

Worked Example — Direct Skip:
Grandparent transfers $20,000,000 to grandchild in 2025.
GST exemption available: $13,990,000
Taxable amount: $20,000,000 − $13,990,000 = $6,010,000
Federal GST tax: $6,010,000 × 40% = $2,404,000
Note: Federal estate or gift tax may also apply in addition to the GST tax.

Direct Skip: A transfer made directly to a skip person, either as a lifetime gift or a bequest at death. The transferor (or their estate) pays the GST tax. The most straightforward GST scenario. Example: a grandmother writing a $2,000,000 check to her granddaughter.

Taxable Distribution: A distribution from a trust to a skip-person beneficiary. The skip-person recipient (the beneficiary) is responsible for paying the GST tax on a taxable distribution. If the trustee pays the tax from trust assets on behalf of the beneficiary, that payment is itself treated as another taxable distribution.

Taxable Termination: Occurs when a non-skip person's interest in a trust terminates (through death, lapse, or release) and, after the termination, all interests in the trust are held by skip persons. The trustee pays the GST tax out of trust assets. Terminations are the most complex GST scenarios and require careful trust drafting to manage.

2025 GST Exemption: The Biggest Planning Opportunity in a Generation

The Tax Cuts and Jobs Act of 2017 (TCJA) doubled the estate, gift, and GST exemptions, which have since been adjusted annually for inflation. In 2025, each person has a $13,990,000 GST exemption — the highest it has ever been. The IRS has confirmed in proposed regulations that amounts transferred using today's higher exemption will NOT be clawed back if the exemption drops after the sunset.

Year	GST Exemption (Per Person)	Annual Gift Exclusion	GST Tax Rate
2025	$13,990,000	$19,000	40%
2024	$13,610,000	$18,000	40%
2023	$12,920,000	$17,000	40%
2022	$12,060,000	$16,000	40%
2021	$11,700,000	$15,000	40%
2026 (post-sunset est.)	~$7,000,000	~$20,000 (est.)	40%

Strategies to Minimize Generation-Skipping Tax

Sophisticated estate planners have developed several legal strategies to minimize or eliminate GST tax liability. These strategies are most effective when implemented before the 2025 sunset:

Dynasty Trusts: Fund an irrevocable trust with your full GST exemption. All assets inside the trust — including all future appreciation — can pass to grandchildren, great-grandchildren, and beyond without incurring GST tax. States like South Dakota, Nevada, and Delaware allow dynasty trusts to last indefinitely.

Annual Gift Tax Exclusion Transfers: The $19,000 annual gift exclusion (2025) is also excluded from GST tax for direct transfers to individuals. A married couple can combine exclusions for $38,000 per grandchild per year with no GST implications, no gift tax return required, and no reduction in the lifetime exemption.

Education and Medical Exclusion: Payments made directly to educational institutions (tuition) or medical providers on behalf of any individual — including skip persons — are fully excluded from both gift and GST tax with no dollar limit. A grandparent paying $80,000/year directly to a grandchild's medical school incurs zero gift or GST tax.

Retained Interest Trusts (GRATs, SLATs, ILITs): Various trust structures allow assets to pass to grandchildren with minimal gift and GST tax. A Grantor Retained Annuity Trust (GRAT) with a zeroed-out gift tax amount allocates little or no GST exemption, but may still transfer significant appreciation to future generations.

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Key Insight — Exemption Allocation Timing: GST exemption must be allocated to a transfer to shield it from GST tax. For direct skips, the exemption is automatically allocated (unless you elect out). For transfers to trusts, automatic allocation rules are complex — you may need to proactively allocate on Form 709. Failing to timely allocate exemption can permanently cost your estate millions. Work with a certified estate planning attorney or CPA.

GST Tax vs. Estate Tax: Understanding the Overlap

The GST tax is separate from, and in addition to, the federal estate and gift tax. A single transfer to a grandchild can trigger both estate or gift tax and GST tax simultaneously. The unified federal estate and gift tax exemption ($13,990,000 in 2025) is legally distinct from the GST exemption — although they are often coordinated in estate planning because they share the same dollar threshold. Paying estate/gift tax does not reduce your GST liability, and vice versa.

⚠️ Professional Advice Required: The generation-skipping transfer tax involves highly complex IRS rules, state-specific considerations, and planning opportunities that can save or cost your estate millions. This calculator provides educational estimates only and should not be used as a substitute for professional legal or tax advice. Consult a licensed estate planning attorney and CPA before making any transfers designed to minimize GST tax.

Frequently Asked Questions

The federal GST tax rate for 2025 is a flat 40% — the same as the top estate and gift tax rate. This rate applies to all taxable GST events (direct skips, taxable distributions, and taxable terminations) after the available GST exemption has been applied. The 40% rate has been in place since 2013 and is not scheduled to change after the 2025 sunset.

The federal GST exemption for 2025 is $13,990,000 per individual (up from $13,610,000 in 2024). Married couples can together shelter $27,980,000 in generation-skipping transfers. This exemption is scheduled to drop to approximately $7,000,000 (inflation-adjusted) after December 31, 2025 unless Congress extends the Tax Cuts and Jobs Act provisions.

A skip person is any individual two or more generations below the transferor — typically grandchildren, great-grandchildren, and beyond. An unrelated individual more than 37.5 years younger than the transferor also qualifies as a skip person. Trusts can also be skip persons if all current beneficiaries are skip persons. Children of a deceased child (i.e., your grandchildren whose parent predeceased) are treated as children for GST purposes, not grandchildren, under the predeceased parent rule.

For direct gifts to individual skip persons, yes — the 2025 annual exclusion of $19,000 per recipient is also excluded from GST tax. However, for gifts to trusts that benefit skip persons, the annual exclusion does NOT automatically apply for GST purposes unless the trust meets specific requirements (such as having Crummey withdrawal rights). Married couples may split gifts for $38,000 per grandchild per year, fully GST-exempt, with no return required.

Yes — properly structured dynasty trusts are one of the most powerful GST tax elimination tools available. When you fund a dynasty trust with assets equal to your GST exemption ($13,990,000 in 2025), those assets — and all future appreciation — pass free of GST tax to every subsequent generation. In states with no rule against perpetuities (South Dakota, Nevada, Delaware), the trust can legally last forever. A $10,000,000 dynasty trust growing at 6% annually reaches $574,000,000 in 65 years — all GST-free.

On January 1, 2026 (absent Congressional action), the GST exemption reverts to the pre-TCJA level adjusted for inflation — estimated at approximately $7,000,000 per person. Critically, the IRS has confirmed in final regulations that transfers made using the higher 2025 exemption will NOT be subject to additional tax if the exemption later decreases (no “clawback”). This makes 2025 a uniquely valuable window to make large GST-exempt transfers.

It depends on the type of transfer. For direct skips, the transferor (the donor) pays the GST tax and reports it on IRS Form 709. For taxable distributions from trusts, the recipient skip person pays the GST tax. For taxable terminations, the trustee pays from trust assets. When the donor pays the GST tax on a direct skip, that tax payment is itself considered an additional gift to the recipient — which can trigger further gift tax in some cases.

Most U.S. states do not have a separate GST tax — the GST tax is primarily a federal tax. However, a handful of states that have decoupled from the federal estate tax system (such as Massachusetts, Oregon, and Washington) may impose state-level estate or inheritance taxes that effectively apply when assets skip to grandchildren through an estate. New Jersey eliminated its state estate tax in 2018; Connecticut is phasing it out. Always verify your state’s current inheritance and estate tax rules with a local estate attorney.

Lifetime GST transfers (direct skips and gifts to trusts with skip person beneficiaries) are reported on IRS Form 709 (United States Gift and Generation-Skipping Transfer Tax Return), which is due April 15 of the year following the gift (or October 15 with an extension). GST transfers at death are reported on IRS Form 706 (United States Estate Tax Return), due 9 months after the date of death. Taxable distributions are reported by the beneficiary on Form 706-GS(D). Taxable terminations are reported by the trustee on Form 706-GS(T).

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