Yes, the death tax is still in effect in 2026. The federal estate tax, which is what “death tax” refers to, applies to the value of a person’s estate above $15 million per individual, with a 40 percent rate on the excess.1Internal Revenue Service. What’s New – Estate and Gift Tax For the overwhelming majority of American families, no federal estate tax is owed and no return needs to be filed. A handful of states, however, impose their own estate or inheritance taxes with exemptions as low as $1 million, which can catch estates that owe nothing to the IRS.
What the Federal Estate Tax Actually Taxes
The federal estate tax is a levy on the right to transfer property at death, and it falls on the estate itself rather than on the heirs.2Internal Revenue Service. Estate and Gift Taxes Before beneficiaries receive anything, the executor adds up everything the deceased person owned or had an interest in: real estate, investment and bank accounts, retirement funds, business interests, life insurance payable to the estate, and personal property. That total is the gross estate.
The executor then subtracts allowable deductions, including debts, funeral costs, administrative expenses, and qualifying charitable bequests.3Office of the Law Revision Counsel. 26 USC 2055 – Transfers for Public, Charitable, and Religious Uses What remains is the taxable estate. Below the exemption, no tax is owed and, in most cases, no return is filed. Above it, the executor files IRS Form 706 and pays the tax out of estate assets before distributing anything.4Internal Revenue Service. Instructions for Form 706 (09/2025)
One point worth clearing up: because the estate pays the tax, heirs generally do not report inherited property as taxable income on their personal returns.5Internal Revenue Service. Gifts and Inheritances The estate tax and the income tax are separate systems. An heir who later sells inherited property at a gain may owe capital gains tax, but the inheritance itself is not income.
The 2026 Exemption and Rate
For anyone who dies in 2026, the first $15 million of their estate is completely exempt from federal estate tax.1Internal Revenue Service. What’s New – Estate and Gift Tax This figure comes from the One, Big, Beautiful Bill Act, signed into law on July 4, 2025, which raised the basic exclusion amount from $13.99 million and eliminated the sunset provision that had been scheduled to cut the exemption roughly in half at the end of 2025.6Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax Starting in 2027, the $15 million base will adjust upward for inflation each year.
If you followed the estate tax debate, you may remember warnings about the exemption dropping to roughly $7 million in 2026. That did not happen. Congress acted before the deadline, and the new law made the high exemption permanent.
For estates that do exceed the exemption, the effective marginal tax rate on every dollar above $15 million is 40 percent.7Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax The rate schedule technically starts at 18 percent and graduates upward, but because the unified credit wipes out all tax on the first $15 million, the lowest bracket an exposed estate actually pays is 40 percent. An estate worth $20 million would face tax on $5 million at that rate, producing a bill of roughly $2 million before additional deductions.
Married Couples Can Shelter Up to $30 Million
When one spouse dies, everything left to a surviving U.S. citizen spouse is fully deductible from the gross estate, regardless of amount.8Office of the Law Revision Counsel. 26 USC 2056 – Bequests, Etc., to Surviving Spouse A person could leave $50 million to their spouse and the estate would owe zero federal tax. The catch is that this only delays taxation: when the surviving spouse eventually dies, their estate is subject to the tax using their own exemption.
Portability closes the gap. If the first spouse to die does not use their full $15 million exemption, the leftover amount can transfer to the surviving spouse, whose combined shield can reach $30 million.4Internal Revenue Service. Instructions for Form 706 (09/2025) Portability is not automatic. The executor of the first spouse’s estate must file Form 706 and elect to transfer the unused exemption, even if the estate owes no tax and would otherwise have no filing requirement. Skipping this step means the unused exemption disappears, and the deadline passes quietly for families who assume no filing is needed.
One boundary: the unlimited marital deduction does not apply if the surviving spouse is not a U.S. citizen. In that case, the estate must transfer assets into a qualified domestic trust to defer the tax.9Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust
State Estate and Inheritance Taxes
Federal rules tell only half the story. An estate that owes nothing to the IRS can still face a significant state bill.
State Estate Taxes
Twelve states and the District of Columbia levy an estate tax that works similarly to the federal version, with the estate paying before assets are distributed. State exemptions range from $1 million to roughly $7 million, and top rates reach 16 percent in most of these jurisdictions.10Tax Foundation. Estate and Inheritance Taxes by State, 2025 An estate worth $3 million might owe nothing federally but face a meaningful tax bill in a state with a $1 million exemption.
State Inheritance Taxes
Five states, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania, tax the person who receives the inheritance rather than the estate that distributes it.10Tax Foundation. Estate and Inheritance Taxes by State, 2025 Iowa previously imposed an inheritance tax but eliminated it as of 2025. Rates range from 0 percent to 18 percent, and what you pay depends heavily on your relationship to the deceased. Spouses and children typically pay nothing or face very low rates, while distant relatives and unrelated beneficiaries pay the highest rates with the smallest exemptions. Maryland is the only state that imposes both an estate tax and an inheritance tax.
State rules do not mirror federal deadlines or exemption amounts, and they change frequently. An estate with property in more than one state may owe taxes to each.
Deadlines and Penalties If You Do Owe
The federal estate tax return (Form 706) is due nine months after the date of death.11Internal Revenue Service. Filing Estate and Gift Tax Returns Filing Form 4768 before that deadline secures an automatic six-month extension, pushing the return due date to 15 months after death.12eCFR. 26 CFR 20.6081-1 – Extension of Time for Filing the Return The extension applies to filing the return, not paying the tax. The estimated tax is still due at the original nine-month mark.
Missing these deadlines triggers two separate penalties. The failure-to-file penalty is 5 percent of the unpaid tax for each month the return is late, up to 25 percent.13Internal Revenue Service. Failure to File Penalty The failure-to-pay penalty adds 0.5 percent per month on any unpaid balance, also capped at 25 percent.14Internal Revenue Service. Failure to Pay Penalty Interest accrues on top of both. On a large estate tax bill, a few months of delay can cost hundreds of thousands of dollars.
Even when no tax is owed, filing Form 706 is required to elect portability of a spouse’s unused exemption. Miss that filing and the deceased spouse’s unused exclusion is gone for good.