Guide to the New Jersey Gift Tax for 2026

New Jersey doesn’t have a gift tax. However, you may still owe a federal gift tax if the gifts you provide exceed a certain amount. Following the passing of the Tax Cuts and Jobs Act, the federal gift tax exclusion rose to $19,000 for 2025. It will remain at $19,000 for 2026. This means you can give someone $19,000 worth of cash, assets, or property without worrying about a gift tax. You would have to report it if you breach that threshold. But you won’t owe anything out of pocket until you exceed your lifetime exclusion limit.

A financial advisor can answer your questions about estate planning and gift-giving.

What Is the Annual Gift Tax Exclusion?

For tax year 2026, the annual gift tax exclusion is $19,000 for any individual. The exclusion applies per person each year. ¹

If you give more than your annual exclusion, however, you may just need to file some extra tax paperwork. In this case, you’d be required to report the gift on IRS Form 709. It’s officially known as the United States Gift (and Generation-Skipping Transfer) Tax Return. This form is due by April 15 following the date you made the gift. However, you may request an extension up until Oct. 15. But keep in mind this doesn’t mean you will pay an out-of-pocket tax. In order to trigger a bill, you’d need to breach the lifetime gift and estate tax exemption. Currently this is $15 million for 2026 ($30 million for married couples). ²

When Do I Owe the Gift Tax?

If you breach your lifetime gift and estate tax exemption, you’d owe gift tax. Unfortunately, the tax rate on money you’ve given can rise quite high, up to 40%. However, the government would only apply this to the portion that goes above the exemption. So if the exemption is $15 million, as it is for 2026, and you gave away $16 million, you’d be taxed on the difference of $1 million.

Still, there are certain steps you can take to protect your money and still remain courteous.

Reducing the Size of Your Estate

If you leave behind portions of your estate to heirs when you pass, you’re technically making a gift. The IRS can tax a portion of its value before it gets transferred to the designated heirs. This explains why the estate tax also goes by the “death tax.” However, the New Jersey state legislature voted to repeal the New Jersey estate tax, effective Jan. 1, 2018.

The most important thing to understand is that the federal gift tax and estate tax share the same lifetime exemption. Using a portion of your gift tax exemption reduces the amount you can later transfer tax-free through your estate. However, the exemption is only affected when gifts to a single individual exceed the annual exclusion amount. You may give up to that limit to any number of people each year without reducing your lifetime exemption. In fact, doing so can help shrink your taxable estate.

For higher-net-worth individuals, additional strategies are available to protect assets intended for heirs. One common approach is establishing a trust with the assistance of an estate planning attorney. Trusts come in many forms, each with distinct rules and legal considerations. Irrevocable trusts typically serve estate planning purposes.

With an irrevocable trust, you name beneficiaries, such as children, who will ultimately receive the assets. Once assets transfer into the trust, they are no longer considered your property. This effectively reduces your taxable estate. You may also appoint a trustee, often a financial professional, to manage the trust assets.

Assets placed in a trust can include most items of value, such as cash savings, investment accounts, retirement assets, portfolios and individual securities.

What Gifts Don’t Get Taxed?

Depending on where your gifted money or assets go, you may not owe any gift tax at all. We’ll explore a few examples below:

• Spouse: You can give as much as you want to your husband or wife without incurring a gift tax as long as your spouse is a U.S. citizen. If you’re married to a foreigner, you have up an annual limit before it applies to your lifetime exemption.
• Medical Expenses: When you cover eligible medical expenses, you won’t have to pay a gift tax regardless of the amount. Eligible expenses can be elusive in the eyes of the IRS, however. You should seek a qualified accountant in your area to discuss making these types of payments.
• Charity: Donating to a registered nonprofit organization is not a taxable event in most cases. But the lines can blur here, too. Seek a financial advisor and tax professional for specific rules around donating to charities.
• Tuition: If you cover tuition on behalf of someone else, the IRS  doesn’t consider it taxable. However, keep in mind that you must send it right to the school. If you provide it to the student to cover it, you may reduce your gift tax exemption. However, a special rule applies when investing in 529 plans to save for someone else’s college expenses.

529 Plans and Gift Taxes

If you’re investing in a 529 plan toward a beneficiary such as your son or daughter, you’re technically making gifts. However, the IRS allows you to contribute up to $95,000 in 2026 without cutting into your annual exclusion. But you must agree to not make any more contributions toward a 529 plan for the same beneficiary in the next five years. ³

In essence, the IRS lets you use five years worth of annual exclusions for someone’s 529 plan. For 2026, that give you $19,000 multiplied by 5, or $95,000. If you choose to contribute less than five years, it’s pro-rated. So if you contribute $38,000 ($19,000 x 2), you’ve used up two years of your annual exclusion. And therefore you can’t contribute toward the plan for the next two years instead of five.

This would not eat into your lifetime exemption. If you simply gave the beneficiary $95,000, you would reduce your lifetime exemption because you gave an individual more than $19,000 in one year.

But what if your son or daughter is in college and you don’t have an active 529 plan in their name? You can always send money directly to the school to cover tuition. Plus, you can send up to $19,000 directly to each student to cover other educational expenses. Neither move requires you to report it to the IRS. And neither lowers your lifetime exemption.

Gifting Strategies for High-Net-Worth Individuals

The annual exclusion and lifetime exemption set the basic rules, but for people with larger estates the more consequential question involves the transfer of wealth to the next generation in a way that minimizes what the IRS can tax. Several approaches exist beyond writing checks each December.

Systematic annual gifting across multiple family members is the simplest starting point. A married couple can combine their individual exclusions to give $38,000 per recipient in 2026 without filing any paperwork or reducing their lifetime exemption. A family can move hundreds of thousands of dollars out of a taxable estate each year through this approach. The compounding effect over a decade is significant, and it requires no complex legal structure.

For larger transfers, certain trust structures allow appreciated assets to move to the next generation at a reduced gift tax cost. A GRAT is one example. The grantor places assets into a trust and receives fixed payments back over a set period. Whatever value the assets generate beyond those payments passes to beneficiaries at little or no gift tax cost. The main risk is that the grantor must outlive the trust term or the assets return to the estate.

A qualified personal residence trust works similarly but applies specifically to a home. The owner transfers the property into a trust while keeping the right to live there for a defined number of years. Because the beneficiaries don’t receive immediate full use of the property, the taxable value of the gift at the time of transfer is lower than the property’s full market value. If the owner outlives the trust term, the home passes to heirs at a substantially reduced gift tax cost relative to its appreciated value.

How Gift Tax Rules Interact With the Step-Up in Basis

Deciding whether to transfer an asset during your lifetime or hold it until death involves more than calculating gift tax exposure. The tax treatment of the cost basis at transfer is often the more important variable, and it works differently depending on when and how the asset moves.

A gift made during your lifetime carries your original purchase price to the recipient as their starting basis. If you paid $30,000 for an investment that has grown to $250,000 and you give it away today, the person receiving it takes on your $30,000 basis. When they eventually sell, they owe capital gains tax measured from that original figure, covering the full appreciation that built up during your ownership even though you never paid tax on it yourself.

The IRS treats assets that pass at death differently. The basis is recalculated to reflect what the asset was worth at the time of death rather than what the original owner paid. A beneficiary who inherits that same $250,000 investment has a basis of $250,000. A sale shortly after for $260,000 produces a taxable gain of only $10,000. The decades of appreciation that occurred during the original owner’s lifetime are never subject to capital gains tax.

Long-Term Holdings

For assets that have appreciated significantly over a long holding period, the difference between these two outcomes can dwarf any gift tax consideration. Real estate purchased thirty years ago, a concentrated stock position that has compounded for decades or a family business with a low original cost all carry embedded gains that transfer with a lifetime gift but reset at death. Giving those assets away early, even within the lifetime exemption, can saddle the recipient with a large future tax bill that holding the asset until death would have avoided entirely.

There are situations where transferring appreciated assets during life still makes sense. If the recipient is in a lower tax bracket than the eventual estate, if the asset is expected to keep appreciating at a rate that makes early transfer attractive despite the basis consequences, or if reducing the taxable estate is a priority, the calculus can favor a lifetime gift. The decision requires looking at both the transfer tax side and the income tax side together rather than treating them as separate questions. Focusing only on whether a gift triggers gift tax while ignoring what basis travels with it leads to decisions that look efficient on one dimension and costly on another.

Bottom Line

Even though New Jersey doesn’t impose a gift tax, you may owe a federal gift tax. But you won’t owe an actual gift tax until you’ve breached your lifetime gift and estate tax exemption. With careful estate planning, a married couple can shield their gifts from taxation.

Tips on Minimizing Gift and Estate Taxes

• A financial advisor can help you build an estate plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Check out SmartAsset’s guide for managing your gift taxes and avoiding what you can.

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