Yes, the death tax is still in effect. The federal estate tax remains on the books in 2026, but a permanent exemption of $15,000,000 per person means the overwhelming majority of estates owe nothing. Married couples who plan correctly can shield up to $30,000,000 between them. Anything above those thresholds is taxed at rates topping out at 40 percent, and about a dozen states plus the District of Columbia add their own estate taxes, with a handful of states also collecting inheritance taxes from beneficiaries.
What Changed in 2025
The confusion around whether the death tax still exists comes from a real cliff that was scheduled to arrive at the end of 2025. The doubled exemption created by the Tax Cuts and Jobs Act of 2017 was set to drop back to roughly half its value after December 31, 2025.1Internal Revenue Service. Estate and Gift Tax FAQs
That sunset never happened. The One, Big, Beautiful Bill Act, signed into law on July 4, 2025, wrote the higher exemption directly into the Internal Revenue Code and indexed it for inflation.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill The exemption jumped from $13,990,000 in 2025 to $15,000,000 in 2026 and will keep rising with inflation in future years.3Internal Revenue Service. What’s New — Estate and Gift Tax So the tax still exists, but its reach is narrower than ever, and the higher threshold is no longer temporary.
The 2026 Exemption and Tax Rates
For individuals who die in 2026, the first $15,000,000 in assets passes free of federal estate tax. Only the dollars above that line generate a bill.
The rate structure is graduated. It begins at 18 percent on the first $10,000 above the exemption and climbs to 40 percent on amounts more than $1,000,000 over the threshold.4Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax In practice, almost every taxable estate lands in the top bracket, so 40 percent is the effective marginal rate for the estates that actually owe.
The exemption is unified with the gift tax, which means large gifts you make during your lifetime eat into what your estate can shelter at death. Give away $3,000,000 in taxable gifts while alive, and your remaining estate exemption drops to $12,000,000. The annual gift tax exclusion is a separate track: in 2026 you can give up to $19,000 per recipient without touching your lifetime exemption at all, and a married couple giving jointly can transfer $38,000 per year to each recipient. Gifts to a non-citizen spouse qualify for an annual exclusion of $194,000, since the unlimited marital deduction that applies to citizen spouses does not apply to them.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
How Married Couples Reach $30 Million
When one spouse dies without using the full $15,000,000 exemption, the unused portion can transfer to the surviving spouse. This is called portability, and it is what lets a married couple shield up to $30,000,000 from federal estate tax.3Internal Revenue Service. What’s New — Estate and Gift Tax
Portability is not automatic. The executor of the first spouse’s estate must file Form 706 and make the election on that return, even when the estate is far too small to owe any tax.5Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax The return is generally due within nine months of the date of death, though a six-month extension is available.6Internal Revenue Service. Instructions for Form 706 Once made, the election is irrevocable.
If the deadline slips by, a simplified relief procedure may still help. Under Revenue Procedure 2022-32, executors of estates that were not otherwise required to file Form 706 can make a late portability election by filing a complete return within five years of the date of death. The return must carry a statement at the top reading “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A),” and no user fee applies.7Internal Revenue Service. Revenue Procedure 2022-32 This relief is not available to estates that were required to file because they crossed the filing threshold on their own.
What Counts Toward the Estate
The gross estate is the total fair market value at death of everything the deceased person owned or held certain rights over.8Office of the Law Revision Counsel. 26 USC 2031 – Definition of Gross Estate Real estate, bank accounts, investments, retirement accounts, business interests, and personal property such as jewelry, vehicles, and art all get counted.
Life insurance surprises many families. Proceeds are included in the gross estate if the policy was payable to the estate, or if the deceased person held any incidents of ownership, such as the right to change beneficiaries, borrow against the policy, or cancel it.9Office of the Law Revision Counsel. 26 USC 2042 – Proceeds of Life Insurance A common planning move is to transfer a policy to an irrevocable trust so the proceeds fall outside the gross estate.
Assets are valued at fair market value on the date of death rather than the original purchase price. The executor may instead elect an alternate valuation date six months after death, but only if it decreases both the gross estate and the total tax owed, and it applies to every asset.10Office of the Law Revision Counsel. 26 USC 2032 – Alternate Valuation For heirs, that date-of-death value also becomes their new cost basis for capital gains purposes, which can wipe out decades of appreciation.11Internal Revenue Service. Gifts and Inheritances
Deductions That Can Erase the Tax
Even estates well over $15,000,000 can end up owing nothing. Three deductions do most of the work:
- Property passing to a U.S. citizen spouse qualifies for an unlimited marital deduction. The entire estate can go to the surviving spouse tax-free, though the tax is only deferred until that spouse’s death. Transfers to a non-citizen spouse do not qualify unless the assets go into a qualified domestic trust.12Office of the Law Revision Counsel. 26 USC 2056 – Bequests, Etc., to Surviving Spouse
- Bequests to qualifying charities, religious organizations, educational institutions, and government entities are fully deductible with no dollar limit.13Office of the Law Revision Counsel. 26 USC 2055 – Transfers for Public, Charitable, and Religious Uses
- Debts and expenses, including outstanding mortgages, medical bills, funeral costs, and the administrative costs of settling the estate, reduce the gross estate.
State Estate and Inheritance Taxes
Federal law is only part of the picture. About twelve states and the District of Columbia impose their own estate taxes, and five states collect a separate inheritance tax. Maryland does both. An estate that owes nothing to the IRS can still face a significant state tax bill, so the laws of the state where the deceased person lived, and any state where they owned property, matter independently.
State estate tax exemptions generally sit well below the federal $15,000,000 line, typically ranging from about $2,000,000 up to amounts that match the federal figure. Top state estate tax rates generally range from roughly 12 to 20 percent.
An inheritance tax works differently. Instead of taxing the estate, it taxes each beneficiary on the share they receive, and the rate depends on the beneficiary’s relationship to the deceased. Spouses are typically exempt. Children and close relatives usually face lower rates or higher exemption amounts, while distant relatives and unrelated beneficiaries can see rates reaching 16 percent. Two people inheriting from the same estate may pay very different amounts.
Filing When an Estate Does Owe
Form 706 is required when the gross estate plus adjusted taxable gifts exceeds $15,000,000 for deaths in 2026, or when the executor wants to elect portability regardless of size.6Internal Revenue Service. Instructions for Form 706 The return and any tax owed are both due within nine months of the date of death. Executors who need more time to gather documentation can request a six-month extension on Form 4768, but the extension covers filing only, not payment. Interest runs on any unpaid tax from the original due date.
Missing the deadline without an extension triggers the failure-to-file penalty of 5 percent of the unpaid tax for each month or partial month the return is late, capped at 25 percent. If the return is more than 60 days late, the minimum penalty is the lesser of $525 or 100 percent of the tax owed.14Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges Interest also accrues on any unpaid balance from the original due date. For the first quarter of 2026, the IRS charges 7 percent annual interest on underpayments, compounded daily, and the rate resets each quarter based on the federal short-term rate plus three percentage points.15Internal Revenue Service. Quarterly Interest Rates