The lifetime gift tax exemption: what QSBS founders need to know

Every dollar of share value gifted to a trust reduces your $15M lifetime exemption. Timing matters.

When you gift QSBS shares to trusts as part of a stacking strategy, each transfer counts against your lifetime gift tax exemption. Understanding how this exemption works — and how to preserve it — is essential to making stacking economically practical.

The Numbers

Lifetime Exemption (2026)

$15M

per individual / $30M married

Annual Exclusion (2025–2026)

$19,000

per recipient, per year

The lifetime exemption was permanently increased from $13.99M to $15M under the One Big Beautiful Bill Act (OBBBA), effective January 1, 2026. It will be indexed for inflation starting in 2027. Unlike the prior increase under the 2017 Tax Cuts and Jobs Act, this one does not sunset.

Read about all OBBBA changes to QSBS →

How It Works

The lifetime exemption is a single, cumulative allowance — not an annual one — and it's unified across two kinds of transfers: gifts you make during life and assets that pass to your heirs at death. The same $15M ceiling covers both. Every dollar used to gift shares during life is a dollar no longer available to shelter your estate later, and what you spend is gone for good; it doesn't replenish each year the way the annual exclusion does.

The annual exclusion is the dividing line for when the lifetime exemption comes into play. Gifts at or below $19,000 per recipient, per year require no reporting and use none of your exemption. Anything above that threshold is reported on IRS Form 709, which tracks your cumulative drawdown against the $15M ceiling. You owe no tax — gift or estate — until that ceiling is exhausted, at which point transfers are taxed at 40%. Because the exemption is granted per person, a married couple has $30M of combined room.

Why This Matters for QSBS Stacking

When you gift shares to a non-grantor trust, the IRS values the gift at fair market value — determined by an independent appraisal, not your 409A or your investors' post-money valuation. Every dollar of share value gifted reduces your $15M lifetime exemption.

This is why timing matters. The earlier you gift, the less exemption you use. California founders should gift early to maximize both state tax savings and exemption preservation.

Example: A founder who owns 20% of their company gifts 10% of their personal holdings to a non-grantor trust.

Gifting 10% of your shares at different company stages

Founder owns 20% of common stock

Seed stage ($5M company)~$100K of exemption used

Series A ($30M company)~$600K of exemption used

Series B ($100M company)~$2M of exemption used

Pre-exit ($500M company)~$10M of exemption used

An independent gift tax appraisal may reduce these amounts through applicable discounts for lack of marketability and minority interest.

Learn which valuation to use when gifting QSBS shares →

Important: The lifetime gift exemption and the estate tax exemption are unified — they share the same $15M ceiling. Exemption used for lifetime gifts reduces what's available to shelter your estate at death. QSBS stacking should be coordinated with your broader estate plan.

Read the full QSBS stacking guide →Model your scenarios with the QSBS stacking calculator →