Tax

Gifting Startup Equity in 2026: The $15M Exemption and the Valuation That Makes It Stick

OBBBA made the $15M estate and gift tax exemption permanent from 2026. Here's how founders gift startup equity and back it with an IRS-defensible valuation.

By 409.AI Team - 2026-07-15

# Gifting Startup Equity in 2026: The $15M Exemption and the Valuation That Makes It Stick

If you founded a company that's actually working, most of your net worth is probably locked up in stock that's worth a fraction of what it will be worth in five years. That gap is the single best estate-planning opportunity a founder gets, and for the first time in a while, you don't have to rush to use it.

The One Big Beautiful Bill Act, signed in July 2025, made the federal estate and gift tax exemption permanent and raised it. Starting January 1, 2026, each individual can transfer $15 million during life or at death before the 40% transfer tax applies, and married couples get $30 million combined. The IRS confirmed the 2026 basic exclusion amount at $15,000,000, up from $13,990,000 in 2025 ([IRS 2026 inflation adjustments](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill)). The number is indexed for inflation going forward.

Here's what changed underneath that headline. Under the 2017 Tax Cuts and Jobs Act, the elevated exemption was scheduled to sunset at the end of 2025 and fall back to roughly $7 million per person. Families spent years planning around that cliff. The OBBBA removed the sunset entirely, so there's no December 31 deadline forcing your hand ([Morgan Lewis](https://www.morganlewis.com/pubs/2025/08/estate-tax-alert-new-15-million-federal-exemption-becomes-law)). That doesn't make the strategy less valuable. It makes the timing question different, and it puts the weight back where it belongs: on getting the valuation right.

Why founders gift equity early

The mechanics are simple even if the tax code isn't. When you give away an asset, its value on the gift date is what counts against your exemption. Every dollar it appreciates afterward grows in the recipient's hands, outside your taxable estate.

Say you gift 1.5 million shares of common stock to an irrevocable trust for your kids when the company is young. If a defensible valuation puts that block at $2 million on the transfer date, you've used $2 million of your $15 million exemption. Five years later the company sells and that same stake is worth $30 million. The $28 million of growth never touches the estate tax. You moved it out of your estate at a cost of $2 million of exemption instead of watching $30 million get taxed at 40% down the road.

That's the whole game: transfer appreciating assets while they're cheap, use as little exemption as possible, and let the growth happen somewhere the estate tax can't reach it. Startup equity is close to a perfect candidate because early-stage common stock is genuinely low-value and the upside is enormous.

The catch is that the IRS knows exactly what you're doing, and the number you put on the gift is the number they'll challenge.

The annual exclusion won't get you far here

Before the big transfers, know the smaller lever. In 2026 you can give up to $19,000 per recipient per year, or $38,000 as a married couple, without filing anything or touching your lifetime exemption ([IRS estate and gift tax FAQs](https://www.irs.gov/newsroom/estate-and-gift-tax-faqs)). That annual exclusion is genuinely useful for cash and public shares.

For a founder trying to move a meaningful equity stake, though, $19,000 barely registers. A single share block worth several million dollars blows past the annual exclusion immediately, which means you're filing a gift tax return and drawing on the lifetime exemption. And once you're in lifetime-exemption territory, the valuation stops being a formality.

Gift and estate value is not your 409A number

This trips up a lot of founders. Your company already has a 409A valuation, so it's tempting to assume that per-share common price is the number you'd use for a gift. It isn't, and the reason matters.

A 409A exists to set a defensible strike price for stock options under Section 409A of the tax code. A gift and estate valuation answers a different legal question: fair market value under the willing-buyer, willing-seller standard the IRS uses for transfer taxes. The two often land in a similar neighborhood, but they're built for different purposes, use different assumptions, and get reviewed by different parts of the IRS. We walk through why these standards diverge in [409A vs. Fair Market Value: Why They Are Not the Same Thing](https://409.ai/articles/409a-valuation-vs-fair-market-value).

Both valuations lean on the same underlying toolkit. An appraiser weighs the [market approach](https://409.ai/articles/market-approach-409a-valuation), the [income approach](https://409.ai/articles/income-approach-409a-valuation), and, for early or asset-heavy companies, the [asset-based approach](https://409.ai/articles/asset-based-approach-409a-valuation), then reconciles them into a supportable conclusion. What separates a gift and estate valuation is what happens after that: the discounts.

Discounts are where the value gets created, and audited

A minority stake in a private company is worth less than its pure pro-rata slice of the whole. You can't force a sale, can't set strategy, and can't easily find a buyer. Appraisers capture that with two adjustments: a discount for lack of control (DLOC) and a discount for lack of marketability (DLOM). These are the same forces that make an employee's common shares worth less than the preferred price investors paid, which we cover in [Why Is Your 409A Valuation Lower Than Your Post-Money Valuation?](https://409.ai/articles/why-is-your-409a-valuation-lower-than-post-money-valuation).

Empirical studies and valuation practice commonly show marketability discounts landing in a 30% to 50% range for illiquid private interests, though the right number depends entirely on the specific company, the size of the block, transfer restrictions, and the facts of the deal ([Cherry Bekaert](https://www.cbh.com/insights/articles/gift-tax-valuation-tax-planning-considerations/)). Applied together, control and marketability discounts can knock a large chunk off the reported gift value, which is exactly why they lower your exemption usage.

It's also exactly why the IRS scrutinizes them harder than almost anything else on a gift tax return. The agency publishes its own [Discount for Lack of Marketability Job Aid](https://www.irs.gov/pub/irs-lbi/dlom.pdf) for examiners, laying out how to attack a DLOM that isn't well supported. A discount pulled from a rule of thumb won't survive. One built from peer-reviewed studies, benchmarked to the actual restrictions on the shares, and documented in a real appraisal usually will.

The report is what starts the clock

There's a procedural reason a serious valuation matters beyond just getting the number right. When you file a gift tax return (Form 709) and adequately disclose the gift, you start a three-year statute of limitations. After it runs, the IRS generally can't come back and revalue the transfer ([The Tax Adviser](https://www.thetaxadviser.com/issues/2025/may/adequate-disclosure-on-gift-tax-returns-a-requirement-for-more-than-gifts/)).

Fail to disclose it adequately and that clock never starts. The IRS can revalue the gift years or even decades later, potentially long after the company has grown and the stakes are far higher. Treasury regulation 301.6501(c)-1(f) spells out what adequate disclosure requires, including a detailed description of the valuation method, and a qualified appraisal is the standard way to meet it. This is the part founders underestimate: the appraisal isn't just supporting the number, it's the thing that makes the number final.

What a defensible gift valuation actually needs

Pulling it together, a gift and estate valuation that holds up has a few non-negotiables:

A clear valuation date tied to the transfer, because value can move fast at a startup and the IRS cares about the specific day. Proper application of the three approaches, reconciled with reasoning, not just averaged. Control and marketability discounts that are quantified from real evidence and matched to the specific block being gifted. And enough documentation that the appraisal itself satisfies the adequate-disclosure standard when it's attached to the Form 709.

This is the same rigor behind a strong 409A report, and if you want to see what that level of detail looks like section by section, [Decoding a 409A Valuation Report](https://409.ai/articles/decoding-a-409a-valuation-report-walkthrough) walks through it. A gift valuation carries the extra weight of the willing-buyer standard and heavier discount scrutiny, so the bar is, if anything, higher.

Timing it with the rest of your founder tax planning

The estate side rarely stands alone. Gifting shares before a big appreciation event pairs naturally with the QSBS rules the same OBBBA expanded, since founders often want both the estate-tax exclusion on future growth and the [Section 1202 gain exclusion](https://409.ai/articles/qsbs-one-big-beautiful-bill-act-section-1202-changes) on an eventual sale. Coordinating the two, along with basics like a properly filed [83(b) election](https://409.ai/articles/the-83b-election-explained-for-founders) on early equity, is where a founder's tax planning either compounds or leaks value. These pieces interact, and the valuation sits underneath most of them.

None of this is a reason to gift equity you might need or before you've talked to an estate attorney and a tax advisor about your own situation. The permanent exemption removed the artificial deadline, which is a good thing. It means you can move deliberately. But the founders who benefit most are still the ones who transfer appreciating stock while it's cheap and back the number with a valuation built to be defended, not one built to be lucky.

If you're weighing a gift of company stock, get the appraisal before the transfer, not after the audit letter. The value on the gift date is the only value that counts, and the report that supports it is what turns a smart move into a settled one.