The IRC 2010 unified credit is a dollar-for-dollar credit against federal estate and gift tax that lets every U.S. citizen or resident transfer up to $15 million in 2026, during life or at death, before any tax is owed.1Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax Married couples who plan around it can shelter up to $30 million between them. The credit is “unified” because the same pool covers taxable gifts made during life and transfers at death: what you use while alive reduces what remains for your estate.
How the Credit Offsets Tax
The estate tax starts with a tentative tax computed on the total value of everything transferred during life and at death, using the graduated rates in Section 2001(c) that top out at 40 percent on amounts over $1 million.2Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax Section 2010 then subtracts a credit equal to the tax that would be owed on the applicable exclusion amount. For 2026, that credit is $5,945,800, which is exactly the tax generated by running $15 million through the rate schedule.
Most people speak in terms of the $15 million exclusion rather than the $5.9 million credit, but they describe the same thing from opposite sides. If total taxable transfers land at or below $15 million, the credit wipes out the entire tentative tax and the estate owes nothing. Only the excess above $15 million actually generates a bill, taxed at the 40 percent top rate.
The credit cannot exceed the tax owed. An estate that generates $3 million in tentative tax uses $3 million of the credit; the unused portion is not refunded, but nothing is due.
The 2026 Applicable Exclusion Amount
Congress set the 2026 basic exclusion at $15 million in the One Big Beautiful Bill Act (Public Law 119-21), signed on July 4, 2025.3Internal Revenue Service. What’s New – Estate and Gift Tax That replaced the temporary doubling under the 2017 Tax Cuts and Jobs Act, which had been scheduled to sunset at the end of 2025 and would have dropped the exclusion to roughly $7 million.
The $15 million figure is permanent, and it will begin adjusting for inflation starting in 2027 under the cost-of-living formula in Section 1(f)(3), using calendar year 2025 as the base, with adjusted amounts rounded to the nearest $10,000.1Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax For the 2026 tax year the exclusion is a flat $15 million with no inflation adjustment.
The generation-skipping transfer tax exemption matches the estate and gift tax exclusion, so it is also $15 million for 2026.4Congressional Research Service. The Generation-Skipping Transfer Tax Families using trusts that skip a generation should plan around both figures at once.
Lifetime Gifts Draw From the Same Pool
Because the credit is unified, taxable gifts you make during life reduce the exclusion available at death. Not every gift counts, though. The annual gift tax exclusion for 2026 is $19,000 per recipient.5Internal Revenue Service. Gifts and Inheritances You can give $19,000 to any number of people each year without filing a return or touching the $15 million lifetime exclusion. A married couple giving jointly can double that to $38,000 per recipient.
Gifts above $19,000 to a single recipient in a calendar year require Form 709, even when no tax is owed.6Internal Revenue Service. Instructions for Form 709 The return tracks how much lifetime exclusion has been used. Spouses who want to split a gift so it counts as coming from both must each file their own Form 709, even if the individual gift was under the annual amount.
Portability Between Spouses
Section 2010(c)(2) lets a surviving spouse add the deceased spousal unused exclusion (DSUE) to their own applicable exclusion.1Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax If a spouse dies without using their full $15 million, the leftover can pass to the survivor. When neither spouse has used any exclusion, the combined shelter reaches $30 million.
The DSUE equals the lesser of the basic exclusion amount or the difference between the deceased spouse’s applicable exclusion and the amount their estate actually used. So if the first spouse to die had a $6 million taxable estate and a $15 million exclusion, the DSUE is $9 million, and the surviving spouse ends up with $24 million in total shelter.
Two limits matter. Only the DSUE from the last deceased spouse counts; if the survivor remarries and that second spouse also dies, the earlier DSUE is replaced by whatever the second spouse leaves behind. And both spouses must generally be U.S. citizens or residents. The executor of a nonresident non-citizen decedent’s estate cannot make a portability election, and a nonresident non-citizen surviving spouse generally cannot use a DSUE unless a tax treaty provides otherwise.7Internal Revenue Service. Instructions for Form 706
Electing Portability Is Not Automatic
Portability requires an affirmative election. The executor of the deceased spouse’s estate must file a complete Form 706, even when the estate is well below the filing threshold.7Internal Revenue Service. Instructions for Form 706 This is the most common and most expensive mistake in estate planning for married couples: assuming portability happens by default and losing millions in shelter because no return was filed.
The standard deadline is nine months after death, with an automatic six-month extension available for estates not otherwise required to file. If that window closes, Revenue Procedure 2022-32 offers a simplified late election: the executor may file a properly prepared Form 706 within five years of the decedent’s death, with a notation at the top of the return that it is filed pursuant to the revenue procedure to elect portability.8Internal Revenue Service. Revenue Procedure 2022-32
The simplified route requires that the decedent died after December 31, 2010, was a U.S. citizen or resident, was survived by a spouse, and that the estate was not otherwise required to file. After five years, the only remaining option is a private letter ruling request, which is expensive and uncertain.
Anti-Clawback Protection for Earlier Gifts
Because the exclusion has moved up and down over the past decade, Treasury issued regulations to protect taxpayers who made large gifts under a higher exclusion. Under 26 CFR ยง 20.2010-1(c), if the exclusion in effect when you made a gift was higher than the exclusion at your death, the estate tax is computed using the higher amount that applied at the time of the gift.9eCFR. 26 CFR 20.2010-1 – Unified Credit Against Estate Tax; In General
So gifts made under the doubled TCJA exclusion between 2018 and 2025 are locked in. If someone gave away $11 million in 2024 and a future Congress dropped the exclusion below that figure, the IRS could not claw back what had already been used. The rule was formalized in Treasury Decision 9884 in November 2019 and remains in force.
Non-Citizen and Non-Resident Situations
The $15 million exclusion is only for U.S. citizens and residents. Estates of individuals who were neither face a much smaller credit of $13,000 under Section 2102, which shelters roughly $60,000 in U.S.-situated assets.10Office of the Law Revision Counsel. 26 USC 2102 – Credits Against Tax Everything above that is taxed at the same graduated rates that apply to domestic estates. A treaty between the U.S. and the decedent’s home country may increase the credit.
Something similar happens on the marital side. The unlimited marital deduction that normally passes assets between spouses tax-free does not apply when the surviving spouse is not a U.S. citizen. To preserve the deduction, assets must pass through a Qualified Domestic Trust (QDOT) under Section 2056A, which defers estate tax rather than eliminating it: the tax is imposed on later principal distributions and on whatever remains when the surviving spouse dies.11Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust The QDOT election is made on a timely filed estate tax return and is irrevocable.
State Estate Taxes Are Separate
The Section 2010 credit only addresses federal tax. About a dozen states and the District of Columbia impose their own estate taxes with lower exemptions, ranging from around $1 million to roughly $14 million, and top state rates reach 20 percent. Five states also charge an inheritance tax, paid by the beneficiary rather than the estate. An estate that owes nothing federally can still face a substantial state bill depending on where the decedent lived or held property.