Is There a Gift Tax in New York? The Three-Year Clawback, the Estate Tax Cliff, and the Federal Rules (2026)

By Albert Goodwin, Esq., New York estate and trust attorney. Last reviewed: January 2026. Figures below are for gifts made and deaths occurring in 2026.

Short answer

• New York gift tax: None. New York repealed its gift tax for gifts made on or after January 1, 2000. There is no New York gift tax return.
• New York three-year add-back: Under New York Tax Law § 954(a)(3), taxable gifts you make within three years of death while a New York resident are added back to your New York gross estate for estate tax purposes. Annual-exclusion gifts, direct tuition and medical payments, and gifts to a spouse or charity are not added back.
• New York estate tax cliff: For deaths in 2026 the New York basic exclusion amount is $7,350,000. If the taxable estate exceeds 105% of that figure ($7,717,500), the exclusion disappears and the entire estate is taxed from the first dollar.
• Federal gift tax: Still applies. The 2026 annual exclusion is $19,000 per recipient. The lifetime exemption is $15,000,000. Gifts above the annual exclusion must be reported on IRS Form 709, but no tax is due until you exhaust the lifetime exemption.
• Two separate lookbacks: The three-year tax add-back has nothing to do with the five-year Medicaid lookback. A gift can be harmless for one and costly for the other.

The rest of this page explains each point with the statute and the 2026 numbers, then works through three New York examples. If you want to see how gifting fits with trusts and other techniques, see our page on advanced New York estate planning techniques.

Why New York has no gift tax, and what replaced it

New York once taxed lifetime gifts. The Legislature repealed that tax for gifts made on or after January 1, 2000, as explained in the Department of Taxation and Finance memorandum TSB-M-97(8)M. Since then a New York resident can give away money or property during life without paying any state tax on the transfer, and without filing anything with Albany.

In 2014 New York rewrote its estate tax. The reform raised the exclusion in stages, created the cliff described below, and added a rule that pulls recent gifts back into the estate. That add-back is the reason the answer to "is there a gift tax in New York" is only the start of the analysis.

The New York three-year clawback: Tax Law § 954(a)(3)

Section 954(a)(3) of the New York Tax Law increases the New York gross estate of a resident decedent by the amount of any "taxable gift" under Internal Revenue Code § 2503 made during the three-year period ending on the date of death. The gift itself was not taxed when made. Instead, its value is counted as if it were still owned at death, and the estate pays New York estate tax on the larger total.

What the add-back captures

The statute borrows the federal definition of a taxable gift. A taxable gift is what remains after the federal annual exclusion, the unlimited exclusion for direct tuition and medical payments, the marital deduction, and the charitable deduction. In practice the add-back reaches the kinds of transfers that would appear on a federal Form 709: large cash gifts to children, a transfer of a house or an interest in a business, and funding of an irrevocable trust beyond the annual exclusion.

What the add-back does not capture

• Annual-exclusion gifts: A gift of $19,000 or less per recipient in 2026 is not a taxable gift, so it is not added back no matter when you die.
• Tuition and medical payments made directly to the provider: These are excluded under IRC § 2503(e) and are not taxable gifts.
• Gifts to a U.S.-citizen spouse: The marital deduction under IRC § 2523 removes them from the taxable-gift calculation.
• Gifts to charity: Deductible under IRC § 2522.
• Gifts made while you were not a New York resident: § 954(a)(3)(A).
• Gifts made before April 1, 2014: § 954(a)(3)(B).
• Gifts made between January 1 and January 15, 2019: § 954(a)(3)(C). The original add-back expired on January 1, 2019, and the Legislature did not reinstate it until mid-January. Gifts made in that two-week gap are permanently excluded.
• Real or tangible personal property located outside New York when the gift was made: § 954(a)(3)(D). A Manhattan resident who gives a child a Florida condominium does not face a New York add-back on that gift.

Sunset and extension history

The add-back was written with an expiration date. It first applied to gifts made on or after April 1, 2014 and was scheduled to end for deaths on or after January 1, 2019. The Legislature extended it in 2019 and extended it again in the 2025–2026 state budget, so it applies to deaths occurring in 2026. Each extension has been attached to a budget bill, and the sunset date can change again. Check the current text of § 954 or ask us before relying on an expiration date.

How the add-back is reported

There is no New York gift tax return. The add-back surfaces only on the New York estate tax return, Form ET-706, which the executor files within nine months of death. The executor must identify taxable gifts made in the three years before death and include them in the New York gross estate. An estate must file ET-706 if the federal gross estate plus the added-back gifts exceeds the basic exclusion amount, even if no tax turns out to be due.

The New York estate tax cliff: Tax Law § 952(c)

New York does not give every estate a flat $7,350,000 deduction. It gives a credit, and the credit phases out fast. Under § 952(c):

• If the New York taxable estate is at or below the basic exclusion amount, the credit equals the full tax. Tax due: zero.
• If the taxable estate is above the exclusion but below 105% of it, the credit shrinks in proportion to how far the estate exceeds the exclusion.
• If the taxable estate is 105% of the exclusion or more, there is no credit at all. The entire estate is taxed under the § 952(b) rate table, which starts at 3.06% and reaches 16% on amounts above $10,100,000.

For deaths in 2026 the basic exclusion amount is $7,350,000 and 105% of that amount is $7,717,500. Approximate New York estate tax at several estate sizes, using the § 952(b) table and the § 952(c) credit:

• $7,350,000: $0
• $7,500,000: about $300,000
• $7,600,000: about $500,000
• $7,717,500: about $735,000 (the credit is gone)
• $8,000,000: about $773,000

Compare the first and fourth lines. An estate of $7,717,500 holds $367,500 more than an estate of $7,350,000, and pays roughly $735,000 more in New York estate tax. The extra assets cost the heirs about twice their value. That is the cliff. It explains why New Yorkers with estates in the $7 million to $9 million range have the strongest reason of anyone in the country to think about lifetime gifts, and why the three-year add-back matters so much to them.

Three New York examples

Example 1: A Brooklyn brownstone owner with an $8 million estate

Suppose a 70-year-old widow in Park Slope owns a brownstone worth $3,500,000 and investment accounts worth $4,500,000. She has two adult children. In 2026 she gives each child $750,000 in cash, a total of $1,500,000.

• Federal side: The first $19,000 to each child is excluded. The remaining $1,462,000 is a taxable gift. She must file Form 709 by April 15, 2027. No federal gift tax is due because the gift is applied against her $15,000,000 lifetime exemption, which drops to $13,538,000.
• If she lives past the three-year mark: Her estate, ignoring growth, is about $6,500,000. That is below $7,350,000, so New York estate tax is zero. Had she kept the $1,500,000, her $8,000,000 estate would have owed about $773,000 to New York.
• If she dies in 2028: The $1,462,000 taxable gift is added back under § 954(a)(3). Her New York gross estate becomes about $7,962,000, which is over the $7,717,500 threshold. The credit is lost and the estate owes roughly $768,000, almost the same as if she had never made the gift. The only saving comes from the two $19,000 annual exclusions, which are never added back.

Two practical points follow. First, the estate pays that tax out of the $6,500,000 that remains, not out of the money the children already received, so the executor needs liquidity. Second, the gift should be made as early as health and finances allow, because the clock under § 954(a)(3) runs from the date of the gift.

Example 2: A married couple in Queens using gift-splitting and 529 plans

A married couple in Forest Hills has a combined estate of $8,200,000, three children, and three grandchildren. Under IRC § 2513 a married couple can elect to treat a gift made by one spouse as made one-half by each. With six recipients and a $38,000 split-gift exclusion per recipient, they can move $228,000 out of their estate every year without using any lifetime exemption. Over five years that is $1,140,000. None of it is a taxable gift, so none of it is subject to the New York add-back, regardless of when either spouse dies.

Two cautions. If one spouse writes all the checks and the other consents to split, a Form 709 must be filed to make the § 2513 election even though no tax is owed. If each spouse gives $19,000 per recipient from separately owned funds, no return is required.

The couple also wants to front-load college savings. IRC § 529(c)(2)(B) lets a donor contribute up to five years of annual exclusions to a 529 plan in a single year, $95,000 per beneficiary per donor in 2026, or $190,000 per beneficiary for a couple that splits gifts, and treat the contribution as spread over five years. The election is made on Form 709. If the donor dies within the five-year window, the portions allocated to the years after death are pulled into the federal gross estate under § 529(c)(4)(C). Because the New York gross estate starts with the federal gross estate, those amounts land in the New York estate as well.

Example 3: A Manhattan grandparent paying tuition and medical bills

A grandparent on the Upper West Side pays $70,000 in tuition directly to a grandchild's university and $30,000 in hospital bills directly to the hospital. Under IRC § 2503(e) neither payment is a gift at all. No Form 709 is needed, no lifetime exemption is used, and because they are not taxable gifts they are outside § 954(a)(3) even if the grandparent dies the following month. The exclusion covers tuition only, not room, board, or books, and the payment must go to the institution or provider rather than to the student.

The federal gift tax rules that still apply to New Yorkers

• Annual exclusion: $19,000 per recipient for 2026, confirmed by IRS Revenue Procedure 2025-32. You may give that amount to as many people as you like each year with no reporting.
• Lifetime exemption: $15,000,000 per person for 2026, set by the One Big Beautiful Bill Act (Public Law 119-21, enacted July 4, 2025) and indexed for inflation after 2026. The exemption is unified: every dollar of taxable gift you make during life reduces the amount that will shelter your estate from federal estate tax at death.
• Form 709: Required for any year in which you give more than the annual exclusion to any one person, make a gift-splitting election, make a 529 five-year election, or give a future interest (such as a gift to many irrevocable trusts). Due April 15 of the following year; an income tax extension on Form 4868 also extends the gift tax return.
• Gifts to a spouse: Unlimited if the spouse is a U.S. citizen (IRC § 2523). Gifts to a non-citizen spouse are limited to an annual amount, $194,000 for 2026.
• Who pays: The giver. The recipient owes no income tax on a gift under IRC § 102. New York has no inheritance tax either; see does New York have an inheritance tax and are joint bank accounts subject to inheritance tax.

For most New Yorkers the federal rules are a reporting exercise. With a $15,000,000 exemption, few estates will owe federal estate tax. The New York estate tax, with its $7,350,000 threshold and its cliff, is the tax that actually bites.

Gifting New York real estate: the stepped-up basis trade-off

Real property is the asset New Yorkers most often want to give away, and the one where a gift most often backfires. The problem is income tax basis.

• Gift during life: Under IRC § 1015 the recipient takes the donor's basis (carryover basis). For loss purposes the basis is the lower of the donor's basis and the fair market value on the date of the gift.
• Transfer at death: Under IRC § 1014 the recipient's basis is reset to the fair market value on the date of death (stepped-up basis). Property held in a revocable living trust gets the same step-up. See what assets can and cannot go into a revocable trust.

Consider the Park Slope brownstone from Example 1. Assume it was bought in 1985 for $250,000 and is worth $3,500,000 today. If the owner gives it to her daughter now and the daughter sells it, the daughter's gain is about $3,250,000. Federal capital gains tax at 20% plus the 3.8% net investment income tax, New York State income tax of up to 10.9%, and New York City income tax of up to 3.876% can together take roughly 38% of that gain, well over $1,000,000. If the daughter instead inherits the brownstone, her basis is $3,500,000 and a prompt sale produces little or no gain.

The question is therefore not simply "does the gift save New York estate tax" but "does the estate tax saved exceed the income tax created." For a highly appreciated house in an estate near the cliff, the answer can go either way, and it depends on whether the recipient plans to sell. Cash and high-basis assets are usually better candidates for gifts than low-basis real estate.

Two further notes on real property. A pure gift of New York real estate is generally not subject to New York real estate transfer tax because there is no consideration, but if the recipient takes the property subject to a mortgage, the outstanding balance is treated as consideration under Tax Law § 1402 and transfer tax can apply. And a nonresident of New York who gives away New York real property is not subject to the § 954(a)(3) add-back, because the gift was made when the donor was not a resident; once the deed is recorded, that property is also no longer part of the nonresident's New York taxable estate under Tax Law § 960.

The three-year tax clawback is not the five-year Medicaid lookback

Clients regularly confuse these two rules. They are different laws with different purposes.

• Tax add-back: Tax Law § 954(a)(3). Three years before death. Applies only to taxable gifts. Annual-exclusion gifts are ignored. Consequence: a larger New York estate tax bill.
• Medicaid lookback: 42 U.S.C. § 1396p(c) and New York Social Services Law § 366. Sixty months before an application for nursing-home Medicaid. Applies to every uncompensated transfer, including $19,000 annual-exclusion gifts, direct tuition payments, and transfers to most trusts. Consequence: a period of ineligibility calculated by dividing the total transferred by the regional monthly nursing-home rate published by the State.

A gifting program that is perfectly designed around the tax rules, such as the Queens couple's $228,000 per year in Example 2, can produce years of Medicaid ineligibility if one spouse needs a nursing home within five years. New York has also enacted a 30-month lookback for community (home care) Medicaid; as of this review its implementation has been postponed several times and it is not in effect, but that can change. If long-term care is a realistic concern, the gifting plan and the Medicaid plan must be built together, often using an irrevocable trust rather than outright gifts. See our page on special needs trusts for the related problem of gifts to a beneficiary who receives government benefits.

When lifetime gifts make sense for a New Yorker

Gifting tends to help most in these situations:

• Your estate is between roughly $7,000,000 and $10,000,000, where the cliff and the first rate brackets do the most damage.
• You are in good health and can reasonably expect to survive three years, or you are using annual-exclusion gifts, which are never added back.
• You are giving cash, marketable securities with high basis, or assets you expect to appreciate sharply, so that future growth leaves your estate.
• Long-term care is already funded by insurance or sufficient assets, so the Medicaid lookback is not a concern.

Gifting tends to hurt when the asset is low-basis real estate the family intends to sell, when you may need the money back, or when you are over 80 and the three-year window is uncertain. In those cases a trust structure, a qualified personal residence trust, or simply holding the asset until death may produce a better after-tax result. Our page on advanced New York estate planning techniques covers these alternatives, and how to avoid probate in New York addresses the separate question of court administration, which gifting also reduces.

Frequently asked questions

Does New York have a gift tax in 2026?

No. New York repealed its gift tax for gifts made on or after January 1, 2000, and has not reinstated it. The only state-level consequence of a gift is the three-year add-back under Tax Law § 954(a)(3), which affects the New York estate tax, not a gift tax.

Do I have to report gifts to New York State?

No. There is no New York gift tax return. Gifts above the federal annual exclusion are reported to the IRS on Form 709. After your death, your executor reports taxable gifts made in the prior three years on the New York estate tax return, Form ET-706.

Does the New York clawback include annual exclusion gifts?

No. The add-back applies only to "taxable gifts" as defined in IRC § 2503. Gifts within the $19,000 annual exclusion, direct tuition and medical payments, and gifts to a U.S.-citizen spouse or to charity are not taxable gifts and are not added back.

Can gifting avoid the New York estate tax cliff?

Yes, if the gifts are made more than three years before death or are annual-exclusion gifts, and if they reduce the New York taxable estate to $7,350,000 or less for a 2026 death. Taxable gifts made within three years of death are added back and may push the estate over the $7,717,500 threshold where the entire exclusion is lost.

Is there gift tax on real estate in New York?

No New York gift tax applies. A transfer of New York real property by gift is reportable to the IRS on Form 709 if its value exceeds the annual exclusion, counts against your federal lifetime exemption, and is subject to the three-year add-back if you were a New York resident when you made it. The recipient takes your income tax basis under IRC § 1015, which can create a large capital gains tax on a later sale.

Does the three-year rule apply if I move out of New York?

The add-back excludes gifts made while you were not a New York resident. A gift made while you lived in New York, followed by a move to Florida and death within three years, raises questions about whether you remain subject to New York estate tax at all, which turns on domicile. Gifts made after a genuine change of domicile are outside § 954(a)(3).

Is the New York three-year clawback the same as the Medicaid five-year lookback?

No. The tax add-back is three years, applies only to taxable gifts, and increases estate tax. The Medicaid lookback is five years, applies to all uncompensated transfers including annual-exclusion gifts, and creates a period of ineligibility for nursing-home Medicaid.

Who pays the federal gift tax, the giver or the recipient?

The giver. In 2026 no federal gift tax is actually payable until a person has made more than $15,000,000 in cumulative taxable gifts. The recipient reports nothing and owes no income tax on the gift under IRC § 102.

Sources

• New York Tax Law § 952 (basic exclusion amount and credit), § 954 (New York gross estate, including the three-year add-back at subdivision (a)(3)), and § 960 (nonresident estates).
• New York State Department of Taxation and Finance, Estate tax page (basic exclusion amounts by year and Form ET-706).
• New York State Department of Taxation and Finance, TSB-M-97(8)M (repeal of the New York gift tax).
• Internal Revenue Code §§ 102, 529, 1014, 1015, 2503, 2513, 2522, and 2523.
• IRS Revenue Procedure 2025-32 (2026 inflation adjustments, including the annual exclusion and the basic exclusion amount).
• One Big Beautiful Bill Act, Public Law 119-21 (July 4, 2025).
• IRS, Frequently Asked Questions on Gift Taxes.
• 42 U.S.C. § 1396p(c) and New York Social Services Law § 366 (Medicaid transfer-of-assets rules).

Talk to a New York estate planning attorney about gifts

The numbers on this page are general. The right answer for you depends on the size and makeup of your estate, your basis in each asset, your health, your family's plans for the property, and whether long-term care is a concern. We prepare gifting plans, irrevocable and revocable trusts, Form 709 filings, and New York estate tax returns for clients across New York City and Long Island. Call the Law Offices of Albert Goodwin at (212) 233-1233 or visit our trust attorney and Brooklyn estate lawyer pages.

About the author: Albert Goodwin is an attorney admitted to practice in New York whose practice concentrates on estate planning, estate and trust administration, and Surrogate's Court litigation. This article is for general information and is not legal advice for any particular situation.