The history of the federal estate tax exemption runs from a $50,000 threshold in 1916 to $15 million per person in 2026, moving in a handful of legislative jumps rather than a steady climb. Each major change narrowed the pool of estates that actually owed the tax, and the current figure shelters all but a fraction of one percent of estates from any federal liability.
Death Taxes Before 1916
Congress taxed wealth at death three times before creating a permanent system, and each attempt was tied to a war. Stamp duties on wills and legacies funded a naval buildup during an undeclared conflict with France in 1797, with bequests over $50 taxed on a graduated scale and widows, children, and grandchildren exempt.1Internal Revenue Service. The Estate Tax: Ninety Years and Counting The Revenue Act of 1862 added an inheritance tax during the Civil War, repealed in 1870. A third inheritance levy funded the Spanish-American War in 1898.2EveryCRSReport.com. A History of Federal Estate, Gift, and Generation-Skipping Taxes
The 1898 tax survived a constitutional challenge in Knowlton v. Moore, where the Supreme Court held that a tax triggered by death was an excise rather than a direct tax requiring apportionment.3Justia U.S. Supreme Court Center. Knowlton v. Moore, 178 U.S. 41 (1900) That ruling cleared the way for what came next.
The 1916 Permanent Estate Tax
The Revenue Act of 1916 created the first permanent federal estate tax and set the exemption at $50,000.1Internal Revenue Service. The Estate Tax: Ninety Years and Counting That threshold was substantial for the era, so the tax fell almost entirely on wealthy families.
Over the next six decades, the exemption crept up while top rates swung hard. Top rates reached 77 percent during World War I and the New Deal. The exemption rose to $60,000 and later to $100,000, gains that barely tracked inflation. Estate and gift taxes ran as separate systems with separate exemptions, which let families who could afford lifetime giving take advantage of both.
The 1976 Unified Credit
The Tax Reform Act of 1976 was the biggest structural change since 1916. Congress merged the estate and gift tax exemptions into a single unified credit that applied to all transfers, whether made during life or at death.4Congress.gov. H.R.10612 – 94th Congress (1975-1976) Tax Reform Act of 1976 Every dollar given away as a gift now reduced what remained to shelter the estate.
The mechanics also shifted. The old exemption reduced the taxable value of the estate before the tax was calculated; the new credit reduced the tax bill itself. Fully phased in, the credit reached $47,000, which translated to an exemption equivalent of $175,625 by 1981.1Internal Revenue Service. The Estate Tax: Ninety Years and Counting The 1976 law also introduced the generation-skipping transfer tax to close a loophole families had used by leaving assets directly to grandchildren.
The 1981 Jump to $600,000
The Economic Recovery Tax Act of 1981 raised the unified credit in a phased increase that pushed the exemption equivalent from $175,625 to $600,000 over six years.1Internal Revenue Service. The Estate Tax: Ninety Years and Counting The $600,000 figure then held through the late 1980s and most of the 1990s, becoming the number an entire generation of estate planners worked around.
The same law introduced the unlimited marital deduction. A surviving spouse could inherit an entire estate without triggering any federal estate tax, deferring the liability until the second spouse died. The Taxpayer Relief Act of 1997 later scheduled increases from $600,000 toward $1 million by 2006, but those increases were overtaken by more aggressive legislation four years later.
The 2001 to 2010 Climb and One-Year Repeal
The Economic Growth and Tax Relief Reconciliation Act of 2001 scheduled a decade of rising exemptions along with a top-rate cut from 55 percent to 45 percent:5Congressional Research Service. Estate and Gift Tax Law: Changes Under the Economic Growth and Tax Relief Reconciliation Act of 2001
- 2002–2003: $1 million
- 2004–2005: $1.5 million
- 2006–2008: $2 million
- 2009: $3.5 million
In 2010 the estate tax disappeared entirely for one year, with all provisions set to snap back to pre-2001 levels in 2011.6Congressional Research Service. Recent Changes in the Estate and Gift Tax Provisions The catch was cost basis. Inherited assets normally receive a stepped-up basis at fair market value, wiping out unrealized gains. The 2010 repeal replaced that with a modified carryover basis, so heirs inherited the original owner’s basis with only limited adjustments. A family inheriting property bought decades earlier for $100,000 and now worth $2 million faced capital gains on up to $1.9 million when they sold.
Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act in December 2010 and gave 2010 estates a choice: accept the repeal with carryover basis, or opt into the estate tax with a $5 million exemption and stepped-up basis. Most large estates chose the latter.
The 2012 Permanence and Portability
After a decade of expiring provisions, the American Taxpayer Relief Act of 2012 made the $5 million base exemption permanent and indexed it to inflation, so the number would rise automatically each year.7Congress.gov. H.R.8 – American Taxpayer Relief Act of 2012 The top rate settled at 40 percent, where it remains.
The 2012 law also made portability permanent. A surviving spouse can claim the deceased spouse’s unused exclusion, letting a married couple shelter up to twice the individual exemption without setting up a bypass trust. Claiming portability requires filing Form 706 for the deceased spouse’s estate even when no tax is owed, and the unused exemption is lost if nobody files.8Internal Revenue Service. Instructions for Form 706
The 2017 Doubling
The Tax Cuts and Jobs Act roughly doubled the exemption by setting a new base amount of $10 million (indexed from 2011), which came out to about $11.18 million per person in the law’s first year.9Congress.gov. Public Law 115-97 A married couple using portability could shield about $22.36 million. Inflation adjustments pushed the individual figure to $13.99 million by 2025.
The doubling was scheduled to expire December 31, 2025, with the exemption reverting to roughly $7 million after inflation. That approaching sunset drove years of urgent lifetime gifting, and the IRS confirmed in 2019 that gifts made under the higher threshold would not be clawed back if the exemption later dropped.10Internal Revenue Service. Making Large Gifts Now Won’t Harm Estates After 2025
The 2026 Figure: $15 Million
The scheduled sunset never happened. The One Big Beautiful Bill Act became law on July 4, 2025, and raised the basic exclusion amount to $15 million per person for 2026, with inflation adjustments beginning in 2027.11Internal Revenue Service. What’s New — Estate and Gift Tax The statute now sets $15,000,000 as the base figure in 26 U.S.C. § 2010(c)(3), with cost-of-living increases measured from calendar year 2025 for deaths after 2026.12Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax
A married couple using portability can shelter $30 million in 2026. The top tax rate stays at 40 percent above the exemption. Unlike the 2017 doubling, this change carries no sunset. The generation-skipping transfer tax exemption also rose to $15 million per person, matching the estate figure as it has since 2010.
Exemption Amounts at a Glance
- 1916: $50,000
- 1976: Unified credit introduced (equivalent rising to $175,625 by 1981)
- 1987–1997: $600,000
- 2002: $1 million
- 2004: $1.5 million
- 2006: $2 million
- 2009: $3.5 million
- 2010: Estate tax repealed for one year
- 2011–2012: $5 million (indexed for inflation)
- 2013–2017: $5 million base, adjusted annually
- 2018–2025: ~$10 million base (TCJA doubling), adjusted annually
- 2026: $15 million per person, $30 million per married couple
A Note on State Taxes
The federal exemption is only part of the picture. As of late 2025, twelve states and the District of Columbia impose their own estate taxes, five states levy inheritance taxes, and Maryland imposes both. State exemption thresholds range from $1 million in Oregon to roughly $14 million in Connecticut. A family that owes nothing federally can still face a significant state bill, and state rules do not automatically move with federal changes.
The pattern across a century is clear enough: each major law has pushed the exemption higher and narrowed the pool of estates that owe anything. What the pattern also shows is that no number has held for long, and the current $15 million figure is only as permanent as the next Congress lets it be.