For deaths in 2026, the amount exempt from federal estate tax is $15 million per individual. A married couple who properly uses portability can shield up to $30 million. Anything above the exemption is taxed at an effective rate of 40%.1Office of the Law Revision Counsel. 26 USC 2001 – Tax Imposed The $15 million figure comes from the One Big Beautiful Bill Act, signed on July 4, 2025, which set the exemption at that level starting January 1, 2026 and made it permanent with no sunset, replacing the temporary Tax Cuts and Jobs Act increase that had been scheduled to expire at the end of 2025.2Internal Revenue Service. Estate Tax The exemption will continue to be adjusted for inflation in future years.3Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax
In practical terms, if the taxable estate lands at $17 million, the $2 million above the threshold produces a federal estate tax of roughly $800,000. The lower brackets in the rate schedule are absorbed by the unified credit, so 40% is a reliable way to think about every dollar over $15 million.
What Counts Toward the $15 Million
The threshold is measured against your gross estate, and the gross estate is wider than most people expect. It includes the fair market value of everything you own or hold certain interests in at death: real estate, bank accounts, investment portfolios, retirement accounts, business interests, and personal property.4Office of the Law Revision Counsel. 26 USC 2031 – Definition of Gross Estate
Life insurance is the asset that most often surprises families. If you held any “incidents of ownership” over a policy on your life, such as the right to change beneficiaries, borrow against the policy, or cancel it, the full death benefit counts toward the gross estate. A $3 million term policy alone can push an otherwise exempt estate over the line.5Office of the Law Revision Counsel. 26 USC 2042 – Proceeds of Life Insurance
Lifetime Gifts Reduce Your Remaining Exemption
The estate and gift tax exemptions share one pool. Taxable gifts made during your lifetime reduce what is left to shelter your estate at death, which is why the IRS calls it the unified credit.3Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax
Not every gift counts. In 2026 you can give up to $19,000 per recipient per year without touching your lifetime exemption at all. Married couples splitting gifts can give $38,000 per recipient. Annual exclusion gifts at or below that level don’t need to be reported unless you elect gift-splitting.6Internal Revenue Service. Frequently Asked Questions on Gift Taxes Anything above $19,000 to a single recipient goes on Form 709, and the excess reduces your $15 million.
An example makes the arithmetic concrete. A $519,000 gift to a child in one year is $19,000 covered by the annual exclusion and $500,000 reported on Form 709. Your remaining lifetime exemption drops to $14.5 million, so at death only $14.5 million of your estate would be sheltered. The IRS reconciles every Form 709 you ever filed when your estate tax return is prepared, which is why careful lifetime tracking matters.
Deductions That Bring an Estate Below the Line
The gross estate is the starting number. Several deductions can shrink it substantially, and for many families they decide whether any tax is owed at all.
Marital Deduction
Property passing to a surviving U.S. citizen spouse qualifies for an unlimited deduction. There is no cap. You can leave your entire estate to your spouse without triggering any federal estate tax, provided the property interest actually passes to the spouse and is included in the gross estate.7Office of the Law Revision Counsel. 26 USC 2056 – Bequests to Surviving Spouse This defers rather than eliminates the tax; the combined estate faces its own reckoning against the exemption when the second spouse dies.
Charitable Deduction
Bequests to qualifying charities, religious organizations, educational institutions, and government entities are fully deductible from the gross estate with no percentage limit.8Office of the Law Revision Counsel. 26 USC 2055 – Transfers for Public, Charitable, and Religious Uses Every dollar left to a qualifying charity reduces the taxable estate dollar for dollar.
Debts, Expenses, and Administration Costs
The estate can also deduct funeral expenses, administration costs (executor fees, attorney fees, court costs, appraisal fees), outstanding debts of the deceased, and unpaid mortgages on property included in the gross estate.9Office of the Law Revision Counsel. 26 USC 2053 – Expenses, Indebtedness, and Taxes For larger estates, administration costs alone can run into six figures.
Doubling the Exemption With Portability
Married couples can combine their exemptions through portability. When the first spouse dies, any unused portion of that spouse’s $15 million exemption can be transferred to the survivor. The IRS calls this the Deceased Spousal Unused Exclusion (DSUE), and it is what allows a couple in 2026 to shelter up to $30 million.3Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax
Portability is not automatic. The executor of the first spouse’s estate must file a federal estate tax return on Form 706 and make the election, even when the estate is well below the filing threshold. If no return is filed, the unused exemption disappears. Once made, the election is irrevocable.
Late Election Relief
Families that missed the deadline may still have time. Under IRS Revenue Procedure 2022-32, estates not otherwise required to file can elect portability on a late Form 706 within five years of the date of death. The return must state at the top of page 1 that it is “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER ยง 2010(c)(5)(A).”10Internal Revenue Service. Revenue Procedure 2022-32 This simplified relief only covers estates below the filing threshold. Estates required to file for other reasons must meet the standard deadline or seek a private letter ruling.
State Estate and Inheritance Taxes
Clearing the federal $15 million does not necessarily mean the estate owes nothing. About a dozen states and the District of Columbia impose their own estate or inheritance taxes, and many use much lower thresholds. Oregon’s exemption starts at $1 million and Massachusetts triggers its tax at $2 million, while Connecticut’s threshold roughly mirrors the federal level.
The range across states with an estate tax runs from $1 million to approximately $14 million, with points along the way including Illinois ($4 million), Maryland ($5 million), Maine ($7 million), and New York ($7.16 million). A handful of other states impose inheritance taxes instead, which are paid by the individual heir and often vary by the heir’s relationship to the deceased. An estate worth $6 million can owe nothing federally and still face a meaningful state bill depending on where the deceased lived.
Filing the Return
Form 706 is due nine months after the date of death. Executors who need more time can file Form 4768 for an automatic six-month extension, moving the filing deadline to 15 months after death, but the request must be made before the original nine-month date passes.11Internal Revenue Service. Instructions for Form 4768
The extension covers filing, not payment. Interest accrues on any unpaid tax from the original due date, so executors who expect a liability should estimate and pay with the extension request. A missed deadline can also cost the portability election, which for a surviving spouse is often the most expensive consequence of a late filing.