Form 706 Instructions: Deadlines, Portability, and Payment

Form 706 is the United States Estate (and Generation-Skipping Transfer) Tax Return, and the executor of a decedent’s estate uses it to report the gross estate, claim deductions, and calculate any federal estate tax owed. These Form 706 instructions walk through when the return is required, how to value and deduct assets, how the unified credit works, which elections to consider, and where to send the completed return. For a 2026 decedent, filing is mandatory when the gross estate plus adjusted taxable lifetime gifts exceeds $15 million, or when the executor wants to elect portability of the deceased spouse’s unused exclusion.¹

Who Must File Form 706

A Form 706 is required when the gross estate combined with adjusted taxable gifts made during the decedent’s lifetime exceeds the basic exclusion amount for the year of death. For decedents dying in 2026, that threshold is $15 million, a figure the One, Big, Beautiful Bill set as the permanent baseline and indexed for inflation going forward.¹

Filing is also required when the executor of a married decedent’s estate wants to elect portability of the deceased spouse’s unused exclusion. That election must be made on Form 706 even if the estate is well below the filing threshold and owes no tax.

The Nine-Month Deadline and Extensions

Form 706 is due nine months after the decedent’s date of death.² If the executor needs more time, filing Form 4768 before the original deadline grants an automatic six-month filing extension.³

The automatic extension buys time to file. It does not buy time to pay. Any estimated tax must still reach the IRS by the original nine-month deadline, or interest and the failure-to-pay penalty start running.³ Part III of Form 4768 lets the executor request a separate payment extension, but that one is not automatic and requires showing reasonable cause.⁴ Interest accrues on unpaid tax from the original due date whether or not a payment extension is granted.

Building the Gross Estate

The gross estate includes everything in which the decedent held an interest at death: real property, bank and investment accounts, business interests, vehicles, personal property, and life insurance proceeds payable to the estate or over which the decedent held incidents of ownership. Jointly owned property is included, with the amount depending on each owner’s contribution. Certain lifetime transfers in which the decedent retained control or a benefit also get pulled back into the estate.

Complex assets like closely held business interests, partnership shares, and unusual real estate need a professional appraisal to support the reported value. The IRS expects appraisals from someone with verifiable education and experience valuing that type of property. Undervaluing invites accuracy-related penalties; overvaluing wastes tax dollars.

Valuing the Estate: Date of Death or Alternate Date

The default rule values every asset at its fair market value on the date of death. Fair market value is the price a willing, informed buyer would pay a willing, informed seller when neither is under pressure to close.

The executor can instead elect to value the entire estate as of six months after the date of death. That alternate valuation date can help when asset values have fallen since death, but the election is allowed only if it reduces both the gross estate and the estate tax due. Cherry-picking is not permitted. The election covers everything or nothing. Assets sold or distributed before the six-month mark are valued as of the date they left the estate.⁵

Deductions That Reduce the Taxable Estate

Subtract allowable deductions from the gross estate to arrive at the taxable estate. The core categories are funeral expenses, administrative costs (executor commissions, attorney fees, appraisal fees), debts the decedent owed at death, and unpaid mortgages on included property. Each must be allowable under the probate laws of the jurisdiction administering the estate.⁶

Two deductions do most of the work in large estates. The marital deduction allows an unlimited deduction for property passing to a surviving spouse who is a U.S. citizen, which effectively defers estate tax until the second death.⁷ The charitable deduction is also unlimited for property passing to qualifying charitable organizations.⁸

Calculating the Tax: Rates and the Unified Credit

The federal estate tax uses a graduated schedule that starts at 18% on the first $10,000 of taxable transfers and tops out at 40% on amounts over $1 million.⁹

The calculation runs in two steps. First, the IRS computes a tentative tax on the taxable estate plus adjusted taxable gifts using that schedule. Then it subtracts the unified credit, which equals the tax that would have been owed on an amount equal to the basic exclusion. For 2026, the credit wipes out all tax on the first $15 million of transfers.¹ Anything above that is taxed at a 40% marginal rate.

If the decedent used part of the exclusion against lifetime taxable gifts, the remaining unified credit at death is reduced by the amount already consumed.

The Portability Election

When a married person dies without using the full $15 million exclusion, the executor can transfer the leftover amount to the surviving spouse by electing portability on Form 706. The transferred amount is called the Deceased Spousal Unused Exclusion (DSUE), and the surviving spouse can add it to their own exclusion for later gift or estate tax calculations.¹⁰

Filing Form 706 solely to elect portability is often worth doing even when no tax is owed. Skipping it means the first spouse’s unused exclusion is lost permanently, which can create a large and avoidable tax bill at the second death.

The election must be made on a timely filed Form 706, meaning within nine months or within the extended fifteen months if Form 4768 was filed.¹⁰

If You Missed the Portability Deadline

Revenue Procedure 2022-32 lets executors who had no filing requirement (because the estate fell under the threshold) file a late Form 706 to elect portability within five years of the date of death.¹¹ Write “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A)” at the top of the return. After five years, the only route is a reasonable-cause relief request under a separate IRS regulation, and that one is not guaranteed.¹²

Generation-Skipping Transfer Tax on Schedule R

Form 706 also reports the generation-skipping transfer (GST) tax, which applies when property passes to a beneficiary two or more generations below the decedent, such as a grandchild. The GST tax is a flat 40% and sits on top of any regular estate tax. Each person has a GST exemption equal to the basic exclusion amount, which is $15 million for 2026, and the executor allocates it on Schedule R.¹³

Allocating the GST exemption to a trust so that its inclusion ratio is zero means all future distributions from that trust to skip persons are permanently free of GST tax, regardless of growth. If the executor does not actively allocate, default deemed-allocation rules apply, and the result may not be optimal. Affirmatively filing Schedule R is recommended even when no GST tax is currently due.¹³

Elections for Farms, Businesses, and Conservation Land

Special Use Valuation Under Section 2032A

If the estate includes farmland or real property used in a closely held business, the executor can elect to value that property based on its current use rather than its highest and best use. The rules are strict: at least 50% of the adjusted gross estate must consist of qualifying real or personal property used in the farm or business and passing to a qualified heir, and the decedent or a family member must have materially participated in operating the farm or business for at least five of the eight years before death.¹⁴ If the heirs stop qualifying use within ten years, the tax savings are recaptured.

Conservation Easement Exclusion

Estates holding land subject to a qualified conservation easement can elect to exclude a portion of the land’s value from the gross estate, up to $500,000. The applicable percentage starts at 40% and drops by 2 points for every point the easement’s value falls below 30% of the land’s value. The land must have been owned by the decedent or a family member for at least three years before death.¹⁵ The election must be made on a timely filed return and is irrevocable.

Where to Mail Form 706 and How to Pay

Form 706 is a paper return. There is no e-file option. Mail the completed return and all supporting schedules to:

Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999¹⁶

For a private delivery service such as FedEx or UPS, use the Internal Revenue Submission Processing Center, 333 W. Pershing Road, Kansas City, MO 64108.¹⁶

Include a certified copy of the death certificate, a copy of the decedent’s will if one exists, and any applicable Form 2848 (power of attorney) or Form 8821 (tax information authorization).¹⁶

Pay by check or money order made out to “United States Treasury,” or electronically through the Electronic Federal Tax Payment System (EFTPS). Write the decedent’s name, Social Security number, and “Form 706” on any check so the IRS applies it correctly. The tax is due by the nine-month deadline regardless of any filing extension.

Installment Payments for Closely Held Business Estates

When a closely held business interest makes up more than 35% of the adjusted gross estate, the executor can elect under Section 6166 to pay the portion of the tax attributable to that business in installments. The first principal payment can be deferred for up to five years, during which only interest is due, and the tax is then paid in up to ten equal annual installments.¹⁷ The election must be made on a timely filed return. The IRS can accelerate the remaining balance if the business interest is sold or an installment is missed.

Penalties for Late Filing or Late Payment

Missing the deadline triggers two penalties that can run at the same time. The failure-to-file penalty is 5% of the unpaid tax for each month the return is late, capped at 25%. If the return is more than 60 days late, a minimum penalty of $525 or 100% of the tax due (whichever is less) applies for returns required to be filed in 2026.¹⁸ The failure-to-pay penalty is 0.5% of the unpaid tax per month.¹⁹

When both penalties apply in the same month, the failure-to-file penalty is reduced by the failure-to-pay penalty, so the combined hit is 5% per month. Interest also accrues on unpaid tax from the original due date, compounding daily at the federal short-term rate plus three percentage points, and it runs even if a filing extension was granted.

Paying estimated tax by the nine-month deadline is critical even when the return itself is not ready. Form 4768 prevents the failure-to-file penalty, but only timely payment prevents the failure-to-pay penalty and interest.

Requesting the Estate Tax Closing Letter

Executors typically need an estate tax closing letter to finalize probate, transfer titles, and distribute assets, because many financial institutions and state courts will not act without one. The IRS charges a $56 user fee for the letter, requested through Pay.gov.²⁰

Do not request it right away. Wait at least nine months after filing the return, or, if the return is under examination, until 30 days after the examination closes. The IRS sends the letter only to the executor listed on the return or to an authorized representative designated on Form 2848 or Form 8821.²¹

Do Not Forget State Estate Tax

Form 706 handles the federal piece only. Roughly a dozen states and the District of Columbia impose their own estate taxes, often with exclusion amounts far below the federal $15 million threshold, and some start at $1 million. An estate that owes nothing to the IRS can still owe a significant state tax. Check whether the decedent’s state of residence, and any state where the decedent owned real property, has a separate estate or inheritance tax with its own return and deadline.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Office of the Law Revision Counsel. 26 USC 6075 – Time for Filing Estate and Gift Tax Returns
3
eCFR. 26 CFR 20.6081-1 – Extension of Time for Filing the Return
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Internal Revenue Service. Instructions for Form 4768
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Office of the Law Revision Counsel. 26 USC 2032 – Alternate Valuation
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Office of the Law Revision Counsel. 26 USC 2053 – Expenses, Indebtedness, and Taxes
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Office of the Law Revision Counsel. 26 USC 2056 – Bequests, Etc., to Surviving Spouse
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Office of the Law Revision Counsel. 26 USC 2055 – Transfers for Public, Charitable, and Religious Uses
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Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax
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Internal Revenue Service. What’s New – Estate and Gift Tax
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Internal Revenue Service. Instructions for Form 706 (09/2025)
13
Internal Revenue Service. Schedule R (Form 706) Generation-Skipping Transfer Tax
14
Office of the Law Revision Counsel. 26 USC 2032A – Valuation of Certain Farm, Etc., Real Property
15
Office of the Law Revision Counsel. 26 USC 2031 – Definition of Gross Estate
16
Internal Revenue Service. Instructions for Form 706
17
Office of the Law Revision Counsel. 26 USC 6166 – Extension of Time for Payment of Estate Tax Where Estate Consists Largely of Interest in Closely Held Business
18
Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges
19
Internal Revenue Service. Failure to Pay Penalty
20
Internal Revenue Service. Estate Tax Closing Letter Fee Reduced to $56 Effective May 21, 2025
21
Pay.gov. Estate Tax Closing Letter User Fee