IRS Publication 950: Estate and Gift Taxes, Exemptions, and Forms

IRS Publication 950 was the agency’s plain-language introduction to federal estate and gift taxes. The IRS has retired the publication, but the law it summarized still controls how lifetime gifts and transfers at death are taxed. For 2026, an individual can transfer up to $15 million during life or at death before any federal gift or estate tax applies.¹ The annual gift tax exclusion is $19,000 per recipient, and anything above the lifetime exemption is taxed at a top rate of 40%. The $15 million figure was set permanently by the One, Big, Beautiful Bill Act, signed into law on July 4, 2025, replacing a scheduled drop to roughly $7 million.

How Much You Can Give Each Year Without Filing

In 2026, you can give up to $19,000 to any one person without reporting it to the IRS.¹ The limit applies per recipient, not in total. Give $19,000 each to ten different people and you have transferred $190,000 with no paperwork. The exclusion resets every January 1.

Go over $19,000 to a single person in a single year and the excess becomes a “taxable gift.” That label is less alarming than it sounds. A taxable gift just means you have to file Form 709 and the excess starts eating into your $15 million lifetime exemption.² You do not actually owe gift tax until that $15 million is gone.

Married couples can double up through gift splitting. If one spouse writes a $38,000 check, the couple can elect to treat it as $19,000 from each of them, keeping the full amount within the annual exclusion.³ Both spouses have to file their own Form 709 when they make this election, even if only one of them actually wrote the check.²

Gifts That Never Count Against Any Limit

Some transfers escape the gift tax entirely, no matter how large. Tuition paid directly to a school and medical bills paid directly to a healthcare provider are both exempt and do not count against the $19,000 annual exclusion or the $15 million lifetime exemption.² The word “directly” matters. Hand the money to your grandchild to pay the tuition themselves and the exemption is gone.

Gifts to a spouse who is a U.S. citizen are unlimited under the marital deduction.⁴ Gifts to a non-citizen spouse follow a different rule: the annual exclusion for 2026 is $194,000.⁵

529 education savings plans allow a special move: you can front-load five years of annual exclusions in a single year. One person can put $95,000 into a 529 for one beneficiary in 2026 without gift tax, and a married couple splitting gifts can contribute $190,000 at once. You report the accelerated contribution on Form 709 and spread it across five years, and you cannot make additional excluded gifts to the same beneficiary during that window.

The $15 Million Lifetime Exemption

Federal estate and gift taxes share a single lifetime exemption. Every dollar you use during life to cover taxable gifts is a dollar that will not be available at death. The IRS calls this the basic exclusion amount.

For 2026, that figure is $15 million per individual.¹ The One, Big, Beautiful Bill Act set that amount permanently and tied it to inflation starting in 2027.⁶ The exemption works as a tax credit rather than a deduction. The IRS calculates what the tax would be on your cumulative lifetime transfers plus your taxable estate, then subtracts the credit equivalent of $15 million. If the credit covers the calculated tax, nothing is owed.

Form 709 is a running ledger. Each taxable gift reported over the years chips away at your exemption. Give $500,000 in taxable gifts over a decade and your remaining exemption at death is $14.5 million, not $15 million.² The executor has to pull together every prior Form 709 to calculate the final tax at death.

Portability Between Spouses

When the first spouse dies without using the full $15 million exemption, the leftover amount does not have to disappear. The surviving spouse can claim it through portability. This “deceased spousal unused exclusion,” or DSUE, stacks on top of the surviving spouse’s own exemption, protecting up to $30 million for a married couple in 2026.⁶

Portability is not automatic. The executor of the first spouse’s estate has to file a complete Form 706 and make the election on that return, even if the estate is far too small to owe any tax.⁷ This is where families make their most expensive mistake: skipping the Form 706 because the estate looks “too small to bother.” Without the filing, the DSUE amount is lost. The deadline is nine months after death, with a six-month extension available on Form 4768.

Miss that deadline entirely and a simplified late-election procedure allows filing Form 706 up to five years after death. The executor writes “FILED PURSUANT TO REV. PROC. 2022-32” at the top of the return. This relief is only available to estates that were not otherwise required to file.⁸

What Counts in the Estate at Death

The gross estate is much broader than what passes through probate. Federal law includes the value of all property in which the decedent had an interest at death, tangible or intangible, wherever located.⁹ Real estate, bank accounts, investment portfolios, vehicles, and personal property all count. Each asset is valued at fair market value as of the date of death, though the executor can elect an alternate valuation date six months later.¹⁰

Assets that skip probate still land in the gross estate. Life insurance proceeds on the decedent’s life are included if the decedent owned the policy or held “incidents of ownership” such as the right to change beneficiaries or borrow against the policy.¹¹ Retirement accounts, payable-on-death bank accounts, and revocable trusts follow the same pattern. Property held jointly between spouses is included at half its value in the first spouse’s gross estate.

From the gross estate, the executor subtracts funeral costs, administrative expenses, debts, and unpaid mortgages.¹² Two deductions typically overshadow the rest. The unlimited marital deduction allows the estate to deduct the full value of property passing to a surviving spouse who is a U.S. citizen, deferring tax until the second death.¹³ A qualified domestic trust is required to get this treatment when the surviving spouse is not a citizen. The charitable deduction removes the full value of property left to qualifying charities or government entities.¹⁴

Step-Up in Basis for Heirs

One of the most valuable features of the system has nothing to do with whether any estate tax is owed. When heirs inherit property, the tax basis resets to the fair market value on the date of death rather than the original purchase price.¹⁵ If a parent bought stock for $50,000 and it was worth $500,000 at death, the heir’s basis is $500,000. Sell it the next day for $500,000 and no capital gains tax is owed. The rule applies to all property in the gross estate, whether or not the estate files a return or owes any estate tax.

When Form 709 and Form 706 Are Due

Form 709 is required for any year you give more than $19,000 to a single person other than your U.S. citizen spouse. It is also required for any gift of a “future interest,” where the recipient cannot use or enjoy the property until later, regardless of value.² Electing gift splitting triggers a filing requirement for both spouses. The return is due April 15 of the year after the gift. An extension on your personal income tax return automatically extends Form 709 to October 15.¹⁶

Form 706 is required when the gross estate plus adjusted taxable gifts exceeds the basic exclusion amount at the date of death, which is $15 million for someone dying in 2026.¹ It is also required whenever the executor elects portability, regardless of the estate’s size.⁷ The deadline is nine months after death.¹⁷ An automatic six-month extension to file is available on Form 4768, but it does not extend the time to pay. Any estimated tax has to be paid by the original nine-month deadline.

State Taxes Are a Separate Matter

Federal law is only part of the picture. Twelve states and the District of Columbia impose their own estate taxes, and five states have an inheritance tax. State exemption thresholds are often much lower than the federal $15 million figure, starting as low as $1 million in some states. An estate that owes nothing to the IRS can still face a six- or seven-figure state bill depending on where the decedent lived.

Estate taxes are paid by the estate itself before assets are distributed. Inheritance taxes are paid by each beneficiary based on what they receive and their relationship to the decedent, with close relatives generally getting higher exemptions or lower rates and distant or unrelated beneficiaries facing the highest rates, reaching 16% in some states. Any state estate or inheritance tax actually paid is deductible on the federal estate tax return.¹⁸

1
Internal Revenue Service. What’s New — Estate and Gift Tax
2
Internal Revenue Service. Instructions for Form 709 (2025)
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Internal Revenue Service. Frequently Asked Questions on Gift Taxes
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Office of the Law Revision Counsel. 26 U.S. Code 2523 – Gift to Spouse
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Internal Revenue Service. Frequently Asked Questions on Gift Taxes for Nonresidents Not Citizens of the United States
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Office of the Law Revision Counsel. 26 U.S. Code 2010 – Unified Credit Against Estate Tax
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Internal Revenue Service. Instructions for Form 706 (09/2025)
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Internal Revenue Service. Revenue Procedure 2022-32
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Office of the Law Revision Counsel. 26 U.S.C. 2031 – Definition of Gross Estate
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eCFR. 26 CFR 20.2031-1 – Definition of Gross Estate; Valuation of Property
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eCFR. 26 CFR 20.2042-1 – Proceeds of Life Insurance
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Office of the Law Revision Counsel. 26 U.S. Code 2053 – Expenses, Indebtedness, and Taxes
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Office of the Law Revision Counsel. 26 U.S. Code 2056 – Bequests, Etc., to Surviving Spouse
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Office of the Law Revision Counsel. 26 U.S. Code 2055 – Transfers for Public, Charitable, and Religious Uses
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Internal Revenue Service. Gifts and Inheritances
16
Internal Revenue Service. Filing Estate and Gift Tax Returns
17
Office of the Law Revision Counsel. 26 U.S. Code 6075 – Time for Filing Estate and Gift Tax Returns
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Office of the Law Revision Counsel. 26 U.S. Code 2058 – State Death Taxes