Federal GST Tax Exemption and Rate Table

How the GST Tax Rate and Exemption Has Changed Over the Years

Learning Through The Internet
Credit: Henk Badenhorst / Getty Images

The GST tax rate isn't talked about much, maybe because few people really understand what a generation-skipping transfer tax is or even know that it exists. The GST goes hand-in-hand with gift and inheritance taxes, but it's specifically aimed at gifts made to -- or transfers into a trust for benefit of -- a younger generation. It addresses recipients who are more than 37.5 years younger than the donor, unless the recipient is related.

In this case, it applies if a generation exists between the donor and the recipient, such as a parent between a grandparent and a grandchild. 

Just as with estate taxes and gift taxes, the Internal Revenue Code allows for a GST tax exemption. Only the portion of gifts and transfers that exceed this amount are taxable.   

History of the GST Tax Rate 

The exemption for federal generation-skipping transfer taxes has increased over the years while the tax rate has decreased. The chart below shows the changes from 1997 through 2015. 

Tax years 2010 through 2012 were based on the Tax Relief, Unemployment Insurance Reauthorization and Job Creation act signed into law by President Barack Obama on December 17, 2010. "TRA 2010" or the "2010 Act," as it came to be called, was only intended to cover a two-year period. It would "sunset" or expire on December 31, 2012. Under TRA 2010, the federal generation-skipping transfer tax exemption and rate would default to the numbers that were in effect in 2001 and 2002 on January 1, 2013, President Obama signed the American Taxpayer Relief Act -- "ATRA" for short -- into law on January 2, 2013.

ATRA permanently extended the laws governing estate taxes, gift taxes and generation-skipping transfer taxes that were put in place under TRA 2010, with one significant exception. The top estate tax, gift tax and generation skipping transfer tax rate under TRA 2010 was 35 percent, but ATRA increased this to 40 percent.

TRA 2010 unified the estate tax, gift tax and generation skipping transfer tax exemptions and also indexed these exemptions for inflation beginning in 2012, so the amount of the exemption increases annually. 

Historical and Future Generation-Skipping Transfer Tax Exemptions and Rates

 

YearGST ExemptionGST Tax Rate
1997$1,000,00055%
1998$1,000,00055%
1999$1,010,00055%
2000$1,030,00055%
2001$1,060,00055%
2002$1,100,00050%
2003$1,120,00049%
2004$1,500,00048%
2005$1,500,00047%
2006$2,000,00046%
2007$2,000,00045%
2008$2,000,00045%
2009$3,500,00045%
2010$5,000,0000%
2011$5,000,00035%
2012$5,120,00035%
2013$5,250,00040%
2014$5,340,00040%
2015$5,430,00040%

 

TRA 2010 made a special provision for the generation-skipping transfer tax for the 2010 tax year. Although the tax wasn't abolished and the exemption amount increased to $5 million that year from $3.5 million in 2009, the tax rate was temporarily set to zero. But TRA 2010 was signed into law on December 17, so this loophole actually only gave donors a couple short weeks to take advantage of tax-free giving if they hadn't already done so in 2010.  

The GST exemption increases to $5.45 million in 2016, and the GST tax rate remains at 40 percent. 

View the federal estate tax exemptions and top estate tax rates from 1916 (the first year the estate tax was enacted) through 1997 at: Table Showing Federal Estate Tax Exemption and Rate: 1916 - 1997.

View the federal estate tax exemptions and top estate tax rates from 1997 through 2014 at: Table Showing Federal Estate Tax Exemption and Rate: 1997 - 2015.

View the federal lifetime gift tax exemptions and top gift tax rates from 1997 through 2016 at: Lifetime Exemption From Federal Gift Taxes: 1997 - 2015.

View the annual exclusion from gift taxes from 1997 through 2016 at: Annual Exclusion From Gift Taxes: 1997 - 2015.