How Much Is the Death Tax? Rates, Exemptions, and Deductions

How much is the death tax? For almost everyone, the answer is zero. The federal estate tax (the actual name of what people call the death tax) applies only when someone dies owning more than $15 million in 2026, and even then it only taxes the amount above that threshold, at graduated rates that top out at 40%.¹ Fewer than 0.1% of estates owe anything federally. State-level estate and inheritance taxes are the ones that catch more families, sometimes starting at $1 million.

The Federal Exemption for 2026

The federal estate tax kicks in only when the total value of everything a person owned at death exceeds the basic exclusion amount. For deaths in 2026, that amount is $15 million per person.² This is a jump from the 2025 figure of $13.99 million. The One Big Beautiful Bill Act, signed into law on August 4, 2025, made the $15 million figure permanent and indexed it for inflation starting in 2027.¹ That change canceled a scheduled sunset that would have roughly halved the exemption at the end of 2025.

Only the value above $15 million is taxed. An estate worth $16 million owes tax on the $1 million overage, not on the full $16 million. The exemption is really a credit that zeroes out tax on the first $15 million of value, so the effective rate on a taxable estate is almost always well below the 40% top bracket.

The exemption is unified with lifetime gifts. Every dollar of taxable gifts made during life (gifts above the annual exclusion of $19,000 per recipient in 2026) reduces what’s left to shelter the estate at death.³ Give away $5 million in taxable gifts during life and you have $10 million of exemption remaining at death.²

Federal Estate Tax Rates

Estates that clear the exemption face a graduated rate structure with 12 brackets, starting at 18% on the first $10,000 of taxable value and climbing to 40% on amounts more than $1 million above the exemption.⁴

$0–$10,000: 18%
$10,001–$20,000: 20%
$20,001–$40,000: 22%
$40,001–$60,000: 24%
$60,001–$80,000: 26%
$80,001–$100,000: 28%
$100,001–$150,000: 30%
$150,001–$250,000: 32%
$250,001–$500,000: 34%
$500,001–$750,000: 37%
$750,001–$1,000,000: 39%
Over $1,000,000: 40%

The brackets apply to the amount over the $15 million exemption, not to the whole estate. Because most taxable estates land squarely in the top 40% bracket for the excess, the lower brackets make only a modest dent. An estate with $2 million above the exemption would owe $345,800 on the first $1 million of overage plus 40% on the second $1 million, totaling $745,800. That works out to an effective rate of about 37.3% on the excess, or roughly 4.4% on the estate as a whole.⁴

Married Couples Get Roughly Double

Married couples can shield up to $30 million between them by combining exemptions. Two mechanisms do the work.

First, the unlimited marital deduction. Anything passing directly to a surviving U.S. citizen spouse is fully deductible with no dollar cap, so a married person can leave everything to their spouse without any federal estate tax at all.⁵ The tax question is deferred until the surviving spouse dies or assets pass to someone other than a spouse.

Second, portability. When the first spouse dies, any unused portion of their $15 million exemption transfers to the surviving spouse. If one spouse dies with a $6 million estate, the remaining $9 million of exemption passes to the survivor, on top of the survivor’s own $15 million.⁶

Portability is not automatic. The executor of the first spouse’s estate has to file Form 706, the federal estate tax return, to elect it, even when the estate is far too small to owe any tax.⁷ Families lose access to this exemption permanently when nobody files because the estate seemed too small to bother with.

Deductions That Shrink the Taxable Estate

The taxable estate is the gross estate (everything the person owned at fair market value on the date of death, from real estate to retirement accounts to life insurance the decedent owned) minus allowable deductions.⁸ The deductions that matter:⁹

Property passing to a surviving U.S. citizen spouse, with no dollar limit
Bequests to qualifying charities
Outstanding debts, credit card balances, and mortgages
Executor fees, attorney costs, appraisal fees, and other administrative expenses
Reasonable funeral costs
State estate or inheritance taxes actually paid¹⁰

The marital deduction is the largest for most married decedents because it can zero out the taxable estate in one step. Charitable bequests do similar work at the top end for families who want to reduce a large estate below the exemption.

State Estate and Inheritance Taxes

The federal number is only half the picture. Twelve states plus the District of Columbia impose their own estate tax, and five states levy an inheritance tax. Maryland has both. Their exemption thresholds are far lower than the federal $15 million, which is how a family that owes nothing to the IRS can still get a six-figure state tax bill.

State estate tax exemptions run from $1 million in Oregon up to roughly $7 million in some states. Washington has the highest top rate at 35% on taxable value above $9 million. Most other states with an estate tax cap their top rate at 16%.¹¹

Inheritance taxes are structured differently. Instead of taxing the estate, they tax the individual recipients based on how closely related they were to the deceased. The five inheritance-tax states (Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) give preferential rates or full exemptions to spouses and close family and tax distant relatives and unrelated beneficiaries at higher rates.¹¹ Being named in the will of a friend who lived in New Jersey costs more than being named as a child would.

State tax applies based on where the decedent lived and where any real property is located. A vacation home in a state with an estate tax can pull those assets into that state’s system even when the decedent’s home state has no estate tax. State death taxes paid do reduce the federal taxable estate, so families paying both are not fully double-taxed on the same dollars.¹⁰

The Step-Up in Basis Cuts the Other Way

Death also triggers a significant tax benefit that often gets left out of “death tax” conversations. When you inherit property, your tax basis resets to fair market value on the date of death.¹² If a parent bought a house for $200,000 forty years ago and it was worth $1.2 million at their death, the heir’s basis is $1.2 million. Selling the next day for $1.2 million produces zero capital gains tax.

This step-up erases the unrealized capital gains that built up during the decedent’s lifetime. For families with appreciated real estate, stock portfolios, or business interests, the step-up often saves more in capital gains tax than the estate tax would have cost, even for estates comfortably below the $15 million line.

Deadlines and Penalties

When federal estate tax is owed, the return is due nine months after the date of death.¹³ An automatic six-month extension to file is available by submitting Form 4768 before the original deadline, but the extension covers filing, not payment. The tax itself is still due at the nine-month mark.

Missing the deadlines gets expensive quickly. The failure-to-file penalty runs 5% of unpaid tax per month, capped at 25%.¹⁴ The failure-to-pay penalty adds 0.5% per month on any unpaid balance, also capped at 25%.¹⁵ Interest accrues on top of both. On a $2 million tax bill, a full year of penalties and interest can add hundreds of thousands of dollars.

Even estates that owe nothing may need to file. Any first-spouse estate that wants to preserve portability has to file Form 706 within the same window, or the surviving spouse loses the unused exemption for good.

1
Internal Revenue Service. What’s New — Estate and Gift Tax
2
Office of the Law Revision Counsel. 26 U.S. Code 2010 – Unified Credit Against Estate Tax
3
Internal Revenue Service. Gifts and Inheritances
4
Office of the Law Revision Counsel. 26 U.S. Code 2001 – Imposition and Rate of Tax
5
Office of the Law Revision Counsel. 26 USC 2056 – Bequests to Surviving Spouse
6
Internal Revenue Service. Frequently Asked Questions on Estate Taxes
7
Internal Revenue Service. Instructions for Form 706 – United States Estate and Generation-Skipping Transfer Tax Return
8
Office of the Law Revision Counsel. 26 U.S. Code 2031 – Definition of Gross Estate
9
Internal Revenue Service. Estate Tax
10
Office of the Law Revision Counsel. 26 U.S. Code 2058 – State Death Taxes
11
Tax Foundation. Estate and Inheritance Taxes by State, 2025
12
Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent
13
Office of the Law Revision Counsel. 26 USC 6075 – Time for Filing Estate and Gift Tax Returns
14
Internal Revenue Service. Failure to File Penalty
15
Internal Revenue Service. Failure to Pay Penalty