President Trump’s estate tax changes, enacted in the One Big Beautiful Bill Act signed on July 4, 2025, permanently raise the federal estate tax exemption to $15 million per person for deaths occurring in 2026. 1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill A married couple using portability can shelter up to $30 million. The 40% top rate on amounts above the exemption is unchanged, 2Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax and the new $15 million baseline has no expiration date.
What the 2025 Law Actually Did
The One Big Beautiful Bill Act (Public Law 119-21) rewrote the exemption directly in the tax code. Congress replaced the old $5 million base figure with a flat $15 million and struck the sunset provision that had been on the books since 2017. 3Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax Starting in 2027, the $15 million figure will be adjusted upward for inflation, measured from a 2025 baseline.
The generation-skipping transfer tax exemption, which by statute mirrors the basic exclusion amount, also rose to $15 million. 4Office of the Law Revision Counsel. 26 USC 2631 – GST Exemption
The exemption covers lifetime gifts and property left at death combined. Because Congress removed the sunset rather than extending it, reducing the exemption again would require entirely new legislation.
How This Differs From the 2017 Tax Cuts and Jobs Act
The 2017 Tax Cuts and Jobs Act temporarily doubled the exemption’s base from $5 million to $10 million per person, adjusted annually for inflation. By 2025, that inflation-adjusted figure had reached $13.99 million per individual. 1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill But the doubling was scheduled to expire on January 1, 2026, dropping the base back to $5 million and leaving an inflation-adjusted exemption of roughly $7 million.
That reversion never happened. The 2025 law is the reason. It moved the exemption higher than the TCJA level and, more consequentially for long-term planning, took the sunset off the table.
What Married Couples Get
Portability is what turns a $15 million individual exemption into a $30 million combined shelter. When the first spouse dies, the executor can transfer the unused portion of that spouse’s exemption to the survivor. The IRS calls this the deceased spousal unused exclusion amount.
There’s a step families routinely miss. To claim portability, the executor must file Form 706, the federal estate tax return, even when the estate owes no tax. 5Internal Revenue Service. Instructions for Form 706 Skip that filing and the surviving spouse permanently loses access to the deceased spouse’s leftover exemption. 6Internal Revenue Service. Frequently Asked Questions on Estate Taxes Families whose combined assets sit comfortably below $15 million today can still be hurt by the omission if the surviving spouse’s holdings later appreciate past the exemption.
The unlimited marital deduction, unchanged by the new law, still allows any amount of property to pass between spouses at death without triggering estate tax, provided the surviving spouse is a U.S. citizen. 7Office of the Law Revision Counsel. 26 USC 2056 – Bequests, Etc., to Surviving Spouse The marital deduction defers the tax; portability keeps it from landing on the survivor’s estate later.
Annual Gift Tax Exclusion for 2026
The lifetime exemption sits alongside a separate annual gift exclusion. For 2026, you can give up to $19,000 per recipient per year without touching your $15 million lifetime amount. 1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill Married couples electing gift-splitting can double that to $38,000 per recipient. There’s no limit on the number of recipients, so a couple with four children and eight grandchildren could transfer $456,000 in a single year without filing a gift tax return.
Payments made directly to schools for tuition or directly to medical providers do not count against either the annual exclusion or the lifetime exemption. 8Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts The word that matters is “directly.” Writing a check to a grandchild who then pays a tuition bill does not qualify. The money has to go straight to the institution.
Gifts Already Made Under the TCJA
Many wealthy individuals made large gifts between 2018 and 2025 specifically to lock in the TCJA’s higher exemption before the anticipated sunset. Treasury issued final regulations confirming that if the exemption later dropped, those gifts would not be pulled back into the estate for tax purposes. 9Internal Revenue Service. Final Regulations Confirm: Making Large Gifts Now Won’t Harm Estates After 2025
The mechanism: the estate tax credit is calculated using whichever exemption is higher, the one in effect when the gifts were made or the one in effect at the date of death. 10Internal Revenue Service. Estate and Gift Tax FAQs Because the 2025 law raised the exemption rather than lowering it, the anti-clawback rule matters less in the immediate term. It remains a backstop against any future reduction.
State Estate Taxes Are a Separate Issue
A $15 million federal exemption does not clear an estate of every death tax. About a dozen states and the District of Columbia impose their own estate taxes, and their exemption thresholds are much lower than the federal figure. Some start as low as $1 million; others kick in between $2 million and $5 million. A handful of additional states levy inheritance taxes, which tax the recipient rather than the estate.
An estate of $6 million owes nothing federally but may owe a meaningful bill in certain states. State estate tax rates commonly run from roughly 10% to 16% on the taxable portion. State rules change frequently and don’t track the federal exemption, so anyone with assets above a few million dollars should check the specific rules where they live.
Filing Deadlines and Penalties
Form 706 is due nine months after the date of death. 5Internal Revenue Service. Instructions for Form 706 Executors can request an automatic six-month extension using Form 4768, pushing the filing deadline to 15 months after death. 11Internal Revenue Service. About Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes The extension covers paperwork only. Any tax owed is still due at the original nine-month mark unless a separate payment extension is granted.
Missing these deadlines gets expensive quickly:
- Late filing: 5% of the unpaid tax for each month or partial month the return is late, up to 25%.
- Late payment: 0.5% of the unpaid tax per month, also capping at 25%. The rate jumps to 1% if the IRS issues a notice of intent to levy and ten days pass without payment.
- Minimum penalty for returns more than 60 days late: $525 or 100% of the tax owed, whichever is less, for returns due in 2026.12Internal Revenue Service. IRS Notices and Bills, Penalties and Interest Charges
There’s no penalty for filing a zero-tax return, and estates that owe nothing should still file when portability is on the table. The cost of skipping that filing shows up years later, when the surviving spouse needs the exemption and no longer has it.