The federal estate tax applies to the transfer of wealth at death. In 2026, the exemption is $13.99 million per person — only estates larger than that owe any federal estate tax. Fewer than 0.2% of American estates are subject to it. For those that are, the top rate is 40% on the taxable portion. Married couples can protect up to $27.98 million through portability.
2026 Federal Estate Tax: Key Numbers
| Item | 2026 amount |
|---|---|
| Individual exemption | $13,990,000 |
| Married couple exemption (with portability) | $27,980,000 |
| Top tax rate | 40% |
| Annual gift tax exclusion | $18,000 per recipient |
| Lifetime gift tax exemption | Shares the $13.99M estate exemption |
| Estate tax return due date | 9 months after date of death |
| Extension available | Up to 6 months (Form 4768) |
Estate Tax Rates by Taxable Value
The estate tax is progressive. “Taxable estate” means the estate value above the exemption.
| Taxable estate (above exemption) | Marginal rate |
|---|---|
| $0–$10,000 | 18% |
| $10,001–$20,000 | 20% |
| $20,001–$40,000 | 22% |
| $40,001–$60,000 | 24% |
| $60,001–$80,000 | 26% |
| $80,001–$100,000 | 28% |
| $100,001–$150,000 | 30% |
| $150,001–$250,000 | 32% |
| $250,001–$500,000 | 34% |
| $500,001–$750,000 | 37% |
| $750,001–$1,000,000 | 39% |
| Over $1,000,000 | 40% |
Effective rate in practice: An estate that is $5 million over the exemption pays roughly 34–38% effective rate on that excess.
What Is Included in the Taxable Estate
The gross estate includes nearly everything you own at death:
- Cash, bank accounts, and investment accounts
- Real estate (at fair market value at date of death)
- Retirement accounts (IRAs, 401(k)s — yes, these are included)
- Life insurance proceeds if you own the policy
- Business interests (sole proprietorship, LLC, partnership shares)
- Jointly held property (your percentage)
- Annuities and pension benefits
- Personal property (cars, art, jewelry)
- Debts owed to you
Deductions reduce the gross estate:
- Funeral expenses
- Estate administration costs
- Debts and mortgages owed by the estate
- The unlimited marital deduction (transfers to a surviving US-citizen spouse are 100% deductible)
- Charitable bequests
The Unlimited Marital Deduction
Assets left to a surviving spouse who is a US citizen pass completely estate-tax-free — there is no limit. This is why most married couples effectively defer estate tax until the death of the surviving spouse.
Important: If the surviving spouse is a non-US citizen, the unlimited marital deduction does not apply. A Qualified Domestic Trust (QDOT) is used instead.
Portability: Doubling the Exemption for Couples
When the first spouse dies, any unused portion of their $13.99 million exemption can be transferred to the surviving spouse. This is called portability.
Example: Portability in Action
- Spouse A dies in 2026 with an estate of $4 million — uses $4 million of their $13.99M exemption
- Unused exemption: $9.99 million
- Surviving Spouse B now has their own $13.99M + $9.99M = $23.98 million total exemption
Critical requirement: Portability must be elected on a timely filed Form 706 estate tax return, even if no estate tax is owed. The deadline is 9 months after death, with a 6-month extension available. Missing the portability election forfeits the unused exemption permanently (though the IRS provides a late portability election procedure for qualifying estates).
How the Gift Tax Connects to the Estate Tax
The estate tax and gift tax share the same lifetime exemption. Every taxable gift you make during your lifetime reduces your estate tax exemption dollar for dollar.
Annual gift exclusion: In 2026, you can give up to $18,000 per person per year ($36,000 for married couples splitting gifts) without using any of your lifetime exemption. This is the most powerful and simple estate reduction tool available to most people.
Example of annual gifting: A couple with three children and six grandchildren could give $36,000 to each of nine recipients = $324,000 per year removed from their estate — tax free.
States With Estate or Inheritance Taxes
Twelve states and DC impose a state-level estate tax with lower exemptions than the federal level:
| State | Estate tax exemption |
|---|---|
| Massachusetts | $2 million |
| Oregon | $1 million |
| Washington | $2.193 million |
| Minnesota | $3 million |
| Illinois | $4 million |
| New York | $7.16 million |
| Maryland | $5 million |
| Connecticut | $13.61 million |
| Hawaii | $5.49 million |
| Maine | $7.07 million |
| Rhode Island | $1.773 million |
| Vermont | $5 million |
See our full estate tax by state guide for current rates.
States with inheritance taxes (paid by heirs, not the estate): Iowa (being phased out), Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania.
Common Estate Tax Reduction Strategies
1. Annual Gifting
Use the $18,000 annual exclusion systematically. Over 20 years, a couple with five heirs can transfer $3.6 million estate-tax free.
2. Irrevocable Life Insurance Trust (ILIT)
Life insurance owned by you is included in your estate. An ILIT owns the policy instead — the proceeds pass to beneficiaries outside your estate, providing liquidity for heirs to pay estate taxes without selling other assets.
3. Grantor Retained Annuity Trust (GRAT)
You transfer assets to a GRAT and receive an annuity stream back. If the assets grow faster than the IRS hurdle rate (the Section 7520 rate), the excess growth passes to heirs estate-tax free.
4. Charitable Remainder Trust (CRT)
Donate appreciated assets to a CRT. You receive income during your lifetime, a charitable deduction now, and the remaining assets pass to charity at death — reducing the taxable estate.
5. Spousal Lifetime Access Trust (SLAT)
One spouse transfers assets to an irrevocable trust for the benefit of the other spouse (and children). The assets leave the grantor’s estate while still being accessible to the family.
Who Must File Form 706
You must file Form 706 (United States Estate Tax Return) if the decedent’s gross estate plus adjusted taxable gifts exceeds $13.99 million in 2026. The return is due nine months after the date of death.
You may also choose to file Form 706 even below the threshold to elect portability for the surviving spouse.
Related Articles
- Estate Tax by State 2026
- Gift Tax 2026: Annual Exclusion and Lifetime Limit
- Annual Gift Tax Limit 2026
- Estate Planning Guide 2026
- Tax Attorney: When to Hire One
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