Federal estate tax kicks in when a person dies in 2026 with assets worth more than $15 million. Everything at or below that line passes to heirs without any federal estate tax at all, and only the dollars above it are taxed. Married couples can effectively stretch the shelter to $30 million, and several deductions can pull a gross estate back below the threshold before the tax ever applies.1Office of the Law Revision Counsel. 26 U.S. Code 2010 – Unified Credit Against Estate Tax
The $15 Million Threshold for 2026
The basic exclusion amount for 2026 is $15 million per person. Congress made that figure the new permanent baseline in the One, Big, Beautiful Bill Act signed on July 4, 2025, replacing the temporary Tax Cuts and Jobs Act exemption that had been scheduled to drop roughly in half at the end of 2025. The annual inflation adjustment stays in place, so the figure will climb slightly each year going forward.2Internal Revenue Service. What’s New – Estate and Gift Tax
The exclusion works as a floor, not a cliff. If someone dies in 2026 with a $17 million estate, the first $15 million is sheltered and only $2 million is subject to tax. The mechanism is the unified credit under IRC Section 2010, which converts the exclusion amount into a dollar-for-dollar credit against the tax on the sheltered portion.1Office of the Law Revision Counsel. 26 U.S. Code 2010 – Unified Credit Against Estate Tax
People who made large gifts between 2018 and 2025, when the temporary exemption ranged from roughly $11.2 million to $13.99 million, don’t lose the benefit. IRS anti-clawback regulations finalized in 2019 guarantee that an estate’s credit is calculated using the higher of the exemption in effect when the gifts were made or the exemption at the time of death.3Internal Revenue Service. Estate and Gift Tax FAQs
How Fast the Rate Climbs Once You Cross the Line
The estate tax uses a progressive rate schedule that starts at 18 percent on the first $10,000 above the exclusion and climbs through several brackets until reaching a top rate of 40 percent on amounts more than $1 million above the exclusion.4Office of the Law Revision Counsel. 26 U.S. Code 2001 – Imposition and Rate of Tax
In practice, the lower brackets get consumed almost immediately. Any estate exceeding the exclusion by a meaningful amount will see most of its taxable value sitting in the 40 percent bracket. A $20 million estate in 2026 would owe roughly $1.95 million on the $5 million above the exclusion, with the bulk taxed at 40 percent.
What Counts Toward the $15 Million
The IRS decides whether an estate crosses the line by calculating the gross estate: the fair market value of everything the person owned or had an interest in at death. Fair market value means what a willing buyer would pay a willing seller in an open transaction, not what the owner originally paid.5Office of the Law Revision Counsel. 26 U.S. Code 2031 – Definition of Gross Estate
Real estate, vehicles, bank accounts, investment portfolios, and business interests are the obvious pieces. Several less obvious categories catch families off guard and can push an estate over $15 million that appeared safely under:
- Life insurance proceeds on the decedent’s life, if the decedent held any incidents of ownership in the policy, such as the right to change beneficiaries, borrow against it, or cancel it.6eCFR. 26 CFR 20.2042-1 – Proceeds of Life Insurance
- Retirement accounts. IRAs, 401(k)s, and other qualified plans are counted at their full balance on the date of death.
- Revocable trusts. Assets the decedent could have changed or revoked are included, because the decedent effectively still controlled them.
- Jointly held property. The decedent’s share is included even if a co-owner continues using it.
Deductions That Pull the Estate Back Under
The gross estate is rarely the number that gets taxed. Federal law allows deductions that shrink the taxable estate, sometimes enough to eliminate the tax entirely:
- Funeral expenses, including burial, cremation, and related services.
- Administration expenses such as legal fees, executor commissions, appraisal costs, and accounting fees.
- Debts, including outstanding mortgages, credit card balances, medical bills, and other enforceable claims against the estate.
- Charitable bequests. Assets left to qualifying charities are deductible without limit under IRC Section 2055.
These deductions are allowed to the extent permitted under the laws of the jurisdiction where the estate is administered.7Office of the Law Revision Counsel. 26 U.S. Code 2053 – Expenses, Indebtedness, and Taxes An estate with $16 million in gross assets and $1.5 million in deductible debts and expenses lands at a taxable estate of $14.5 million, safely under the 2026 exclusion.
Married Couples Can Shelter $30 Million
The threshold shifts substantially for married couples. Under IRC Section 2056, assets passing to a surviving spouse qualify for an unlimited marital deduction. The entire estate can transfer to the surviving spouse with zero tax, regardless of size.8Office of the Law Revision Counsel. 26 U.S. Code 2056 – Bequests, etc., to Surviving Spouse Collection is simply deferred until the surviving spouse dies.
Portability then doubles the shelter. When the first spouse dies without using all $15 million of their exclusion, the executor can elect to transfer the leftover amount, called the deceased spousal unused exclusion, to the surviving spouse. The survivor adds it to their own $15 million, potentially sheltering up to $30 million from federal estate tax.9Internal Revenue Service. Instructions for Form 706 The election requires filing Form 706 for the first spouse’s estate, even when it owes no tax. Skip that filing and the unused exclusion disappears.10Internal Revenue Service. Frequently Asked Questions on Estate Taxes
Non-Citizen Surviving Spouse
The unlimited marital deduction doesn’t apply if the surviving spouse is not a U.S. citizen. To defer the tax in that case, assets must pass into a qualified domestic trust, or QDOT. At least one trustee must be a U.S. citizen or a domestic corporation, and no principal distributions can be made unless that trustee has the right to withhold the tax. The QDOT postpones the estate tax until distributions are made or the surviving spouse dies.11Internal Revenue Service. Instructions for Form 706-QDT
Lifetime Gifts Chip Away at the Same $15 Million
The estate tax and gift tax share the same $15 million exclusion. Every dollar given away during life above the annual gift exclusion reduces the remaining estate exemption by the same amount. For 2026, the annual gift exclusion is $19,000 per recipient, so gifts up to that amount to any number of people each year don’t touch the lifetime exemption.12Internal Revenue Service. Revenue Procedure 2025-32
Gifts above $19,000 per recipient don’t trigger immediate tax but do erode the $15 million. Give a child $1 million in 2026 (after the annual exclusion) and the remaining estate exemption drops to roughly $14 million. At death, the tax then kicks in on assets above whatever exemption is left.
State Estate Taxes Kick In Much Sooner
An estate can owe nothing to the IRS and still owe a substantial tax to the state. Twelve states and the District of Columbia impose their own estate taxes, and their thresholds sit far below the federal $15 million. Oregon’s starts at $1 million. Massachusetts taxes estates above $2 million. State rates generally run from under 1 percent to 16 percent, though Washington’s top rate reaches 20 percent.13Tax Foundation. Estate and Inheritance Taxes by State
Five states (Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) also levy an inheritance tax, which is paid by each beneficiary on the share they receive rather than by the estate. Rates often depend on the beneficiary’s relationship to the deceased, with spouses and children typically paying nothing and more distant heirs paying more. Maryland imposes both an estate tax and an inheritance tax.
The Filing Deadline After Death
When an estate exceeds the federal exclusion, or when the executor wants to elect portability, IRS Form 706 must be filed. The return demands a detailed accounting of every asset, its fair market value, every deduction claimed, and the tax calculation.14Internal Revenue Service. About Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return
Form 706 is due nine months after the date of death.15Office of the Law Revision Counsel. 26 USC 6075 – Time for Filing Estate and Gift Tax Returns Executors can request an automatic six-month extension by filing Form 4768 before the original deadline, but the estimated tax is still due at nine months and interest accrues on any late payment. Missing the deadline without an extension triggers a failure-to-file penalty of 5 percent of the unpaid tax per month, capped at 25 percent.16Internal Revenue Service. 20.1.2 Failure To File/Failure To Pay Penalties On a $2 million tax bill, that cap adds $500,000.