The unified credit against estate tax is a dollar-for-dollar credit that eliminates federal estate tax on the first $15 million of a person’s estate in 2026. It comes from Section 2010 of the Internal Revenue Code, and Congress set the current amount through the One, Big, Beautiful Bill signed on July 4, 2025.1Internal Revenue Service. What’s New — Estate and Gift Tax Married couples who take the right steps can shelter up to $30 million between them. Because the credit reduces the tax itself rather than the value of the estate, most estates in the country owe no federal estate tax at all.
How the Credit Reduces the Tax
Section 2010 gives every decedent’s estate a credit equal to the tax that would otherwise be owed on the basic exclusion amount.2Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax The credit is applied against the tentative estate tax after it has been calculated using the graduated rate schedule. Any estate valued at or below the exclusion amount owes zero federal estate tax. The credit cannot exceed the tax imposed, so it never produces a refund.
This is different from a deduction. A deduction only lowers the taxable base before rates are applied; a credit erases the tax bill directly. For an estate worth exactly $15 million in 2026, the credit zeroes out the tentative tax entirely.
The $15 Million Exemption in 2026
The basic exclusion amount for 2026 is $15,000,000 per person.3Internal Revenue Service. Estate Tax Public Law 119-21 amended Section 2010(c)(3) to replace the temporary doubled exemption from the 2017 Tax Cuts and Jobs Act with a permanent $15 million floor. Without the new law, the TCJA amount was set to expire on December 31, 2025, and the exemption would have dropped to roughly $7 million after inflation adjustments.1Internal Revenue Service. What’s New — Estate and Gift Tax
Beginning in 2027, the $15 million figure will be adjusted upward each year for cost-of-living increases, using 2025 as the reference year, with adjustments rounded to the nearest $10,000.2Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax For 2026 itself, the exemption is a flat $15 million with no inflation adjustment yet applied.
Lifetime Gifts Use the Same Credit
The estate tax credit and the gift tax credit are one pool. Section 2505 ties the gift tax credit directly to the estate tax credit under Section 2010, so any exemption used during your lifetime reduces what’s left at death.4Office of the Law Revision Counsel. 26 US Code 2505 – Unified Credit Against Gift Tax The tax system treats all large transfers over an entire life as a single running total.
Gifts within the annual exclusion don’t count against the credit. For 2026, you can give up to $19,000 to any one recipient without filing a gift tax return or touching your lifetime exemption.5Internal Revenue Service. Gifts and Inheritances Gifts to your spouse, tuition paid directly to an educational institution, and medical bills paid directly to a provider are also excluded.6Internal Revenue Service. Instructions for Form 709
Anything above the annual exclusion for a single recipient must be reported on IRS Form 709.6Internal Revenue Service. Instructions for Form 709 Filing the return doesn’t mean gift tax is owed. It records the portion of the unified credit that’s been consumed. A $119,000 gift, for example, uses $19,000 of the annual exclusion and draws $100,000 from the $15 million lifetime pool. Actual gift tax only kicks in once cumulative reported gifts exceed the full exemption. At that point, additional gifts and any remaining taxable estate face a top federal rate of 40 percent.7Office of the Law Revision Counsel. 26 US Code 2001 – Imposition and Rate of Tax
Recordkeeping matters. Every Form 709 filed over the years feeds into the final estate tax calculation, and losing track of past gifts can lead to overpaying or to underpaying and facing penalties.
Portability Between Spouses
When the first spouse dies, any unused portion of their $15 million exemption can transfer to the surviving spouse. The tax code calls this the Deceased Spousal Unused Exclusion, or DSUE. The survivor’s own $15 million exemption is added to whatever the deceased spouse didn’t use.2Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax A couple where the first spouse used none of their exemption can shield up to $30 million from federal estate tax.
Portability is not automatic. The executor has to file Form 706 after the first death, even when the estate is below the filing threshold and owes no tax.8Internal Revenue Service. Frequently Asked Questions on Estate Taxes This is where many families miss out. When a spouse dies with a modest estate, no one thinks to file an estate tax return because none is required. But skipping it permanently forfeits the DSUE.
Filing Windows for Portability
Form 706 is normally due nine months after the date of death, with an automatic six-month extension available by filing Form 4768 before the original deadline.8Internal Revenue Service. Frequently Asked Questions on Estate Taxes For estates that aren’t otherwise required to file, Revenue Procedure 2022-32 lets the executor file Form 706 solely to elect portability at any time within five years of the date of death, with a notation at the top of the return stating it is filed under that procedure.9Internal Revenue Service. Revenue Procedure 2022-32
Estates that must file because their value exceeds the threshold cannot use this simplified late-election route. For them, missing the deadline (including the six-month extension) means the DSUE is lost.
Deductions That Shrink the Estate First
The credit applies after deductions have already reduced the estate’s taxable value, so knowing what comes off first helps you see whether the credit is even needed.
The Unlimited Marital Deduction
Property passing to a surviving spouse is fully deductible from the gross estate, with no dollar cap. Section 2056 lets the estate subtract the entire value of assets inherited by the surviving spouse.10Office of the Law Revision Counsel. 26 US Code 2056 – Bequests, Etc., to Surviving Spouse A married person can leave everything to their spouse with zero federal estate tax regardless of size. The tax is deferred, not eliminated: when the surviving spouse dies, their estate (now including the inherited assets) faces taxation, offset by their own credit plus any DSUE they elected.
Debts, Expenses, and Charitable Gifts
The estate can deduct funeral costs, administrative expenses such as executor and attorney fees, outstanding debts, and unpaid mortgages on property included in the estate.11Office of the Law Revision Counsel. 26 USC 2053 – Expenses, Indebtedness, and Taxes Charitable bequests are deductible as well. Each of these lowers the taxable estate before the tax rates are applied, which reduces the amount the unified credit has to offset.
State Death Taxes Paid
Estate or inheritance taxes paid to a state are deductible from the federal taxable estate under Section 2058.12Office of the Law Revision Counsel. 26 US Code 2058 – State Death Taxes The deduction covers taxes actually paid, not amounts merely owed, and must be claimed within the time limits tied to the federal return.
Alternate Valuation
If asset values fall after the date of death, the executor can elect to value the entire estate six months later. Property sold or distributed within that window is valued as of the date it was disposed of.13Office of the Law Revision Counsel. 26 US Code 2032 – Alternate Valuation The election is only available when it reduces both the gross estate value and the total tax owed, and once made it is irrevocable.
How the Tax Is Computed
The gross estate includes all property the decedent owned or held interests in at death, valued at fair market value: real estate, investments, business interests, retirement accounts, life insurance proceeds payable to the estate, and personal property.14Office of the Law Revision Counsel. 26 US Code 2031 – Definition of Gross Estate
After subtracting deductions, you get the taxable estate. The IRS adds back any adjusted taxable gifts (lifetime gifts above the annual exclusion) and computes a tentative tax using the Section 2001 rate schedule. Rates are graduated, starting at 18 percent on the first $10,000 and topping out at 40 percent on amounts over $1 million.7Office of the Law Revision Counsel. 26 US Code 2001 – Imposition and Rate of Tax The unified credit is then subtracted. If the credit is larger than the tentative tax, nothing is owed. If not, the difference is the estate tax.
The return and payment are generally due nine months after the date of death.15Internal Revenue Service. Filing Estate and Gift Tax Returns A six-month filing extension is available, but the estimated tax still has to be paid by the original deadline to avoid interest. The final tax must be paid in cash, which sometimes forces the sale of illiquid assets when the estate lacks cash on hand.
What the Credit Does Not Cover
The federal unified credit doesn’t shield an estate from state-level death taxes. Twelve states and the District of Columbia impose their own estate taxes, and five states levy inheritance taxes. State thresholds are much lower than the federal $15 million, in some cases starting at $1 million, so an estate that owes nothing federally can still face a state bill. None of the state estate tax exemptions are portable between spouses the way the federal exemption is, so couples in those states need separate planning.
The generation-skipping transfer tax is also separate. It applies when wealth passes to someone two or more generations below the transferor, such as a grandchild, and it carries its own $15 million exemption alongside the same 40 percent rate as the estate and gift tax.16Congress.gov. The Generation-Skipping Transfer Tax (GSTT) Unused GST exemption is automatically allocated to direct skips unless the transferor elects otherwise on Form 709.17eCFR. 26 CFR 26.2632-1 – Allocation of GST Exemption Once the GST exemption is exhausted for a transfer, the 40 percent GST tax applies on top of any estate or gift tax already due.