When Is an Estate Tax Return Required? Threshold and Deadlines

A federal estate tax return is required when a deceased person’s gross estate, combined with certain lifetime gifts, exceeds the basic exclusion amount for the year of death — $15,000,000 for people who die in 2026.¹ The return, Form 706, is filed by the executor. A filing can also be required, or strongly advisable, in smaller estates: to preserve a surviving spouse’s unused exclusion, to report generation-skipping transfers, or to satisfy a state return even when the federal government asks for nothing.²

The 2026 Federal Filing Threshold

For deaths in 2026, the basic exclusion amount is $15,000,000.¹ If the gross estate plus adjusted taxable gifts made during the decedent’s lifetime exceeds that number, the executor must file Form 706, regardless of how much tax is ultimately owed after deductions and credits.² The 2025 exclusion was $13,990,000.

The current figure comes from the One, Big, Beautiful Bill (Public Law 119-21), signed on July 4, 2025. Before that law, a temporary provision from the 2017 Tax Cuts and Jobs Act was set to expire at the end of 2025, dropping the exclusion back to roughly $7 million (adjusted for inflation). Congress instead set the base amount permanently at $15,000,000, with inflation adjustments for deaths after 2026.³

Estates above the exclusion are taxed on a graduated scale that starts at 18 percent and reaches a top rate of 40 percent on amounts more than $1,000,000 above the exclusion.⁴ Because the lower brackets are consumed quickly, most taxable estates end up close to the 40 percent effective rate.

What Counts Toward the Gross Estate

The gross estate is broader than what the decedent owned outright. It covers the fair market value at death of virtually everything the decedent had a financial interest in:

Bank accounts, brokerage accounts, stocks, bonds, and mutual funds
Real estate, at full market value, whether a primary home, vacation property, or rental
Sole proprietorships, partnership interests, and closely held corporate stock
Life insurance proceeds payable to the estate, or payable to other beneficiaries if the decedent held “incidents of ownership” in the policy, such as the right to change beneficiaries, borrow against it, or cancel coverage⁵
Jointly owned property (the decedent’s proportional share, or full value in some spousal situations)
IRAs, 401(k)s, pensions, and annuities
Vehicles, jewelry, art, collectibles, and household items

Two categories often surprise executors. Certain transfers made within three years of death are pulled back into the estate, particularly transfers of life insurance policies or relinquished powers that would otherwise have kept an asset in the gross estate. Any gift taxes paid on gifts made within three years of death are also added back.⁶

The IRS compares this total, increased by adjusted taxable gifts, against the $15,000,000 exclusion.² Two large deductions can eliminate tax on an estate that crosses the line: the unlimited marital deduction for assets passing to a U.S.-citizen spouse, and the charitable deduction for assets left to qualifying charities. Debts, funeral expenses, attorney fees, and administrative costs are also deductible. Even so, if the gross-estate figure exceeds the exclusion before those deductions are applied, the return is still required.

Filing When No Tax Is Owed: Portability

A Form 706 filing can be critical even when the gross estate is well below $15,000,000. Under the portability rules, a surviving spouse can add the first spouse’s unused exclusion to their own.² If the first spouse’s taxable estate uses only $3,000,000 of the $15,000,000 exclusion, portability lets the survivor carry the remaining $12,000,000, producing a combined exclusion of $27,000,000. Properly planned, married couples can effectively shield up to $30,000,000.

Portability is not automatic. The executor must file Form 706 and make the election on the return, even though no tax is owed.³ Without a timely filing, the unused exclusion is permanently lost.

For estates that are not otherwise required to file, Revenue Procedure 2022-32 provides a simplified extension: the executor has up to five years from the date of death to file Form 706 solely to elect portability.⁷ Waiting is risky, though. Financial records disappear, and accurate valuations become harder to establish years later.

Generation-Skipping Transfers

Form 706 also covers the generation-skipping transfer (GST) tax, which applies when assets pass to someone two or more generations below the decedent, typically a grandchild, or to an unrelated person more than 37.5 years younger. The GST tax is a flat 40 percent on top of any regular estate tax.⁴

Each person has a GST exemption equal to the basic exclusion amount, $15,000,000 for 2026.⁸ If the estate makes direct gifts to grandchildren or funds trusts for their benefit, the executor allocates the exemption on Schedule R of Form 706.⁹ Failing to allocate the GST exemption on the return can leave transfers taxed at the full 40 percent rate.

State Estate and Inheritance Taxes

The federal threshold is only part of the picture. Roughly a dozen states and the District of Columbia impose their own estate taxes, often with much lower exemptions. State estate tax thresholds currently range from about $2,000,000 to the federal level, so an estate well below $15,000,000 can still owe state estate tax and require a state return.

A handful of states impose an inheritance tax instead of, or in addition to, an estate tax. Inheritance tax is based on who receives the property rather than the total value of the estate. Close relatives typically pay lower rates or are exempt, while distant relatives and unrelated beneficiaries can face rates as high as 16 percent. One state imposes both.

Because rules vary widely, executors should check the tax laws in every state where the decedent lived or owned real property. A state filing obligation can exist even when the federal government requires nothing.

Deadline, Extension, and Penalties

Once a filing obligation exists, Form 706 is due nine months after the date of death.¹⁰ Filing Form 4768 before that deadline grants an automatic six-month extension, pushing the total filing window to 15 months.⁹ The extension covers filing only. The IRS still expects an estimated payment by the original nine-month deadline.

Missing the deadline triggers two separate penalties:

Failure to file: 5 percent of the unpaid tax for each month or partial month the return is late, capped at 25 percent¹¹
Failure to pay: 0.5 percent of the unpaid tax for each month it remains outstanding, also capped at 25 percent¹²

Both penalties can run at the same time, though the failure-to-file penalty is reduced by the failure-to-pay amount for any month both apply. Interest also accrues on unpaid balances from the original due date.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Internal Revenue Service. Frequently Asked Questions on Estate Taxes
3
Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax
4
Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax
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Office of the Law Revision Counsel. 26 USC 2042 – Proceeds of Life Insurance
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Office of the Law Revision Counsel. 26 USC 2035 – Adjustments for Certain Gifts Made Within 3 Years of Decedents Death
7
Internal Revenue Service. Revenue Procedure 2022-32
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Internal Revenue Service. Whats New – Estate and Gift Tax
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Internal Revenue Service. Instructions for Form 706
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Internal Revenue Service. Filing Estate and Gift Tax Returns
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Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
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Internal Revenue Service. Topic No 653, IRS Notices and Bills, Penalties and Interest Charges