What Is the Estate Tax?
The federal estate tax is a tax on the transfer of property at death. It applies to the total value of a deceased person's assets — including real estate, investments, business interests, life insurance proceeds, and other property — above the exemption threshold. Only estates that exceed the exemption amount owe any federal estate tax. The tax is paid by the estate itself before assets are distributed to heirs.
The estate tax is closely linked to the gift tax system through a unified credit: lifetime gifts that exceed the annual exclusion reduce your available estate tax exemption dollar-for-dollar. This prevents individuals from simply giving away all assets before death to avoid the tax.
2026 Estate Tax Exemption
| Category | 2026 Amount |
|---|---|
| Individual exemption | $13,990,000 |
| Married couple (with portability) | $27,980,000 |
| Top marginal tax rate | 40% |
| Applicable credit amount | $5,389,800 |
Portability allows a surviving spouse to use the deceased spouse's unused exemption amount by filing IRS Form 706 (estate tax return), even if no estate tax is owed. This effectively doubles the exemption for married couples without requiring a bypass trust.
Annual Gift Tax Exclusion
| Scenario | 2026 Annual Exclusion |
|---|---|
| Individual gift per recipient | $19,000 |
| Married couple (gift-splitting) per recipient | $38,000 |
| Gifts to non-citizen spouse | $190,000 |
The annual gift tax exclusion lets you give up to $19,000 to any number of recipients each year without filing a gift tax return or using any of your lifetime exemption. Married couples who elect gift-splitting on IRS Form 709 can give up to $38,000 per recipient. These gifts are completely tax-free and do not reduce your estate tax exemption.
Gifts above the annual exclusion must be reported on Form 709 and count against your lifetime gift/estate tax exemption of $13,990,000. No gift tax is actually owed until you exhaust the full lifetime exemption.
Lifetime Gift Tax Exemption (Unified Credit)
The lifetime gift tax exemption is unified with the estate tax exemption at $13,990,000 for 2026. This means every dollar of taxable gifts you make during your lifetime (above the annual exclusion) reduces the amount that can pass tax-free at death. For example, if you make $3 million in taxable lifetime gifts, your remaining estate tax exemption at death would be $10,990,000.
| Tax Type | 2026 Exemption | Tax Rate |
|---|---|---|
| Estate tax | $13,990,000 | 40% |
| Gift tax (lifetime) | $13,990,000 (unified) | 40% |
| Generation-skipping transfer (GST) tax | $13,990,000 | 40% |
The generation-skipping transfer (GST) tax applies to transfers that skip a generation — for example, gifts or bequests directly to grandchildren. It has its own separate exemption of $13,990,000 and is taxed at a flat 40% rate on amounts above the exemption, in addition to any estate or gift tax.
The current high exemption amounts were established by the Tax Cuts and Jobs Act (TCJA) of 2017, which roughly doubled the exemption. These elevated levels are scheduled to sunset after 2025. If Congress does not act to extend or make permanent the current levels, the estate tax exemption would revert to approximately ~$7,000,000 per individual (inflation-adjusted from the pre-TCJA base of $5,490,000) starting in 2026.
The figures on this page reflect the current-law TCJA levels as projected by the IRS. If the sunset takes effect, roughly twice as many estates could become taxable. Consult a qualified estate planning attorney or tax advisor to prepare for either outcome.
Key dates: The TCJA provisions expire December 31, 2025. Any legislative action would need to be signed into law before that date to maintain the higher exemptions.
Estate Planning Strategies
Given the uncertainty around the TCJA sunset, estate planning professionals recommend considering these strategies:
Use It Before You Lose It: If your estate approaches or exceeds the potential lower exemption (~$7M), consider making large gifts now while the $13.99M exemption is available. The IRS has confirmed that gifts made under the higher exemption will not be "clawed back" if the exemption drops (the so-called "anti-clawback" rule under Treasury Reg. 20.2010-1).
Annual Exclusion Gifts: Maximize annual exclusion gifts ($19,000/person) to reduce your taxable estate without touching your lifetime exemption. A married couple with three children and three grandchildren could transfer $228,000 per year gift-tax-free.
Irrevocable Trusts: Assets placed in irrevocable trusts (such as ILITs, GRATs, SLATs, or dynasty trusts) are generally removed from your taxable estate. These must be established and funded while you are alive.
Portability Election: Ensure a Form 706 is filed at the first spouse's death, even if no tax is owed, to preserve the unused exemption for the surviving spouse.
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What is the 2026 federal estate tax exemption?
The 2026 federal estate tax exemption is $13,990,000 per individual. Married couples can effectively shield up to $27,980,000 through portability — using the deceased spouse's unused exemption. The top tax rate on amounts above the exemption is 40%. These figures assume the TCJA provisions remain in effect.
How much can I gift tax-free in 2026?
In 2026, you can gift up to $19,000 per recipient per year without filing a gift tax return or using any lifetime exemption. Married couples who elect gift-splitting can give up to $38,000 per recipient. There is no limit to the number of recipients. Gifts above the annual exclusion count against your $13,990,000 lifetime exemption.
What happens to the estate tax exemption after the TCJA sunsets?
Without Congressional action, the estate tax exemption is scheduled to revert to approximately $7 million per individual (inflation-adjusted from the pre-TCJA $5.49 million base) after 2025. This would cut the current exemption roughly in half. The IRS has confirmed an "anti-clawback" rule: gifts made under the higher exemption will not be retroactively taxed if the exemption drops.
What is the generation-skipping transfer (GST) tax in 2026?
The 2026 GST tax exemption is $13,990,000, matching the estate tax exemption. The GST tax rate is a flat 40%, applied to transfers that skip a generation (e.g., grandparent to grandchild). Like the estate tax exemption, the GST exemption is subject to the TCJA sunset and could revert to approximately $7 million.