Estate Tax Exemption 2026: $15 Million, Portability, State Taxes

The 2026 number, from the statute

Most pages say “the exemption is $15 million.” Here is where that comes from and what it is attached to.

• The statute. 26 U.S.C. 2010(c) gives every estate a credit equal to the tax on the “applicable exclusion amount”, which is the basic exclusion amount plus, for a surviving spouse, the deceased spousal unused exclusion (DSUE). Before 2026 the base was $5,000,000, indexed from 2011, and a temporary rule doubled it for deaths from 2018 through 2025.
• The 2025 law. Section 70106 of Public Law 119-21 struck “$5,000,000” and inserted “$15,000,000”, changed the indexing to start after 2026 with 2025 as the base year, and struck the temporary doubling rule. Its effective-date clause: “The amendments made by this section shall apply to estates of decedents dying and gifts made after December 31, 2025.”
• The IRS figure. Rev. Proc. 2025-32, section 3.14, says section 70106 “amends § 2010(c)(3) by increasing the basic exclusion amount to $15,000,000 for calendar year 2026” and that the GST exemption under section 2631(c) is also $15,000,000. Indexed amounts are rounded to the nearest $10,000 (section 2010(c)(3)(B)), and the IRS publishes the yearly figure in its annual inflation revenue procedure; Rev. Proc. 2025-32 was the one for 2026.
• Is it permanent? It has no sunset date in the statute any more (our reading of section 70106). “Permanent” only means that: Congress can change it with a new law, as it did in 2001, 2010, 2013, 2017 and 2025 (the amendment list of section 2010).

What a $15,000,000 exclusion means in dollars: the tentative tax on an estate grows at 40% above $1,000,000 (section 2001(c)), so a single person dying in 2026 with a $20,000,000 taxable estate owes about $2,000,000 of federal estate tax (40% of the $5,000,000 above the exclusion), and one with $40,000,000 owes about $10,000,000 (our arithmetic, ignoring deductions and lifetime gifts). The return is due 9 months after death (26 U.S.C. 6075(a)).

Gifts made under the higher exclusion are protected if the exclusion later falls: Treasury’s regulation at 26 CFR 20.2010-1(c) computes the estate’s credit using the larger of the exclusion applied to the gifts or the one in effect at death. The rule was written for the 2025 sunset that did not happen, and still applies to any future reduction (our reading).

Portability: the election that doubles it, and the deadline that loses it

What it is. When the first spouse dies and leaves everything to the survivor, the marital deduction (26 U.S.C. 2056(a)) means the first estate uses none of its exclusion. Portability lets the survivor add that unused amount (the DSUE) to his or her own. Section 2010(c)(4) caps it at the basic exclusion amount and ties it to the last deceased spouse.

What it requires. Section 2010(c)(5)(A): the DSUE may not be used “unless the executor of the estate of the deceased spouse files an estate tax return on which such amount is computed and makes an election on such return”, and “Such election, once made, shall be irrevocable.” The regulation (26 CFR 20.2010-2(a)(1)) treats a portability return as a required return, so it is due nine months after the decedent’s date of death, or the end of an extension. A complete and properly prepared Form 706 makes the election unless the executor opts out (20.2010-2(a)(2)); estates filing only for portability may report estimated values for property going to the spouse or charity (20.2010-2(a)(7)(ii)).

The late window. Rev. Proc. 2022-32 (effective July 8, 2022) lets an executor who missed the deadline elect by filing a complete Form 706 on or before the fifth annual anniversary of the date of death, with the heading it prescribes, but only if the estate had no filing requirement of its own under section 6018(a). An estate large enough to have to file cannot use it.

How often it is used. On estate tax returns filed in 2024, 1,020 surviving-spouse estates claimed a DSUE totalling $6.66 billion; 601 of them were in the $10 million to $20 million band, the size where a second exclusion decides whether any tax is owed (IRS SOI Table 1). The count was 556 on returns filed in 2015.

What portability does not carry (our reading of the sources named): the GST exemption is not portable (section 2010(c) covers the estate tax credit only; section 2631(c) sets the GST amount separately); state exclusions mostly are not (Illinois’s Attorney General says portability “is inapplicable to the computation and assessment of the Illinois Estate Tax”, while Maryland adds DSUE in Tax-General 7-309(b) and Hawaii allows it up to $5,490,000); and the unused amount of a first spouse is lost if the survivor remarries and the new spouse dies first, because the statute uses the last deceased spouse.

What the exemption does not cover

• State estate and inheritance taxes, which start far lower (table below). The federal estate gets a deduction, not a credit, for state death taxes paid (26 U.S.C. 2058(a)).
• Generation-skipping transfer tax on gifts and bequests to grandchildren or trusts for them, which has its own $15,000,000 exemption for 2026 that must be allocated (section 2631).
• Income tax. The estate tax exemption has nothing to do with the heir’s basis: inherited property generally takes its value at death, whether or not a Form 706 is filed. That rule, its exceptions and the IRS data on real estate in estates are in our step-up in basis guide; what a sale costs without a death is in our capital gains tax on real estate guide.
• Lifetime gifts. Taxable gifts above the $19,000 annual exclusion use up the same $15,000,000; they are added back as “adjusted taxable gifts” when the estate tax is computed (section 2001(b)). Returns filed in 2024 added back $27.35 billion of them on 4,416 returns (IRS SOI).

Who actually files and pays: IRS data, 2015 to 2024

The IRS Statistics of Income (SOI) Division tabulates every federal estate tax return by the year it is filed. Most returns filed in a year are for deaths the year before, so returns filed in 2024 mostly reflect the $12.92 million threshold for 2023 deaths (SOI footnote). No other source counts who pays.

Doubling the exclusion in 2018 halved the number of returns, from 13,526 filed in 2018 to 6,409 in 2019, and the number of taxable estates from 5,484 to 2,570. Tax collected fell less, because the largest estates pay most of it: 2023’s $44.41 billion was the highest in the series (IRS SOI; comparisons are our arithmetic). With the threshold at $15,000,000 for 2026 deaths, returns filed from 2027 on will be drawn from an even narrower group (our reading).

Returns filed in 2024, by size of gross estate (IRS SOI Table 1):

Percentages are our arithmetic on the SOI amounts; real estate is the sum of personal residence, other real estate and real estate partnerships. Two readings. First, most filers owe nothing: in the $10 million to $20 million band only 27.4% of returns were taxable, because a spouse, a charity, the DSUE or deductions absorbed the rest. The deduction for bequests to a surviving spouse alone was $81.88 billion on returns filed in 2024, 32.9% of all gross estate. Second, real-estate-heavy estates sit exactly in the band the new exclusion moves: real estate was 25.7% of gross estate between $10 million and $20 million, against 12.3% above $50 million.

State estate and inheritance taxes in 2026

This is where a $3 million to $15 million estate is most likely to owe something. An estate tax is charged to the estate on everything above a threshold; an inheritance tax is charged on what each heir receives, at a rate set by the heir’s relationship. We read each from the state’s statute or its revenue department; where a legislature’s site did not respond from our connection, we read the official text from the Internet Archive’s copy and say so in the sources file.

State death taxes in force on October 12, 2026 (thresholds for 2026 deaths unless noted)

Cells marked “not verified” are ones we could not read from the official statute today: Illinois and Rhode Island compute their tax from the old federal state death tax credit through an interrelated calculation, and the top rate is not stated on the pages we saved. Several thresholds are indexed and therefore dated: New York’s $7,350,000 applies to deaths January 1 to December 31, 2026, Maine’s $7,160,000, Rhode Island’s $1,838,056 and DC’s $4,988,400 to 2026 deaths, and Washington’s exclusion will be re-indexed for 2027. Hawaii’s figure is from the Rev. 2025 instructions, the latest published.

Washington changed twice in a year. A 2025 law raised the exclusion to $3,000,000 and the top rate to 35% for deaths from July 1, 2025. For deaths on or after July 1, 2026, RCW 83.100.040(2)(a)(iii), as amended by 2026 c 209, takes the top rate back to 20% above a $9,000,000 Washington taxable estate, and RCW 83.100.020 sets the exclusion at $3,000,000 (it was $3,076,000 for deaths in the first half of 2026). For the same estate, the date of death now decides which of three schedules applies.

Where the states show up in the federal data. Estates deduct state death taxes on Form 706 under section 2058. On returns filed in 2024, 1,280 estates deducted $3.03 billion. New York residents accounted for 293 of those returns and $1.05 billion, 34.7% of the national total (IRS SOI Table 2; share is our arithmetic). Washington residents deducted $354 million on 78 returns, Illinois $353 million on 150, Massachusetts $291 million on 107.

Where the property is matters as much as where the owner lived. Oregon taxes a nonresident whose estate includes “Real property located in Oregon” (ORS 118.010(2)), Massachusetts applies its filing threshold to nonresidents with Massachusetts real estate based on their “total worldwide estate” (DOR guide), and Washington, New York and the others prorate by the share of property located in the state (our reading). Each of Massachusetts and Rhode Island places an automatic lien on a decedent’s real estate that has to be released before a clean sale (Massachusetts DOR guide; Rhode Island ADV 2025-27).

The New York cliff, worked through

New York Tax Law 952(c)(1) gives a full credit when the New York taxable estate is at or below the basic exclusion amount, phases the credit out over the next 5%, and then: “no credit shall be allowed to the estate of any decedent whose New York taxable estate exceeds one hundred five percent of the basic exclusion amount.” Past that point, the whole estate is taxed from the first dollar under the 952(b) schedule, which starts at 3.06% and reaches 16.0% above $10,100,000.

With the 2026 exclusion of $7,350,000 (Department of Taxation and Finance), the cliff is at $7,717,500 (our arithmetic):

A New York taxable estate of $7,500,000 owes $386,400, more than twice the $150,000 that crossed the line. The statute gives no portability for New York purposes; the federal DSUE does not appear in section 952 (our reading). Because the tax is computed on the New York taxable estate, charitable and marital deductions move an estate across or back over the line, which is why New York planning often centres on that one number (our reading; not a recommendation).

One estate, five places: 2026 tax on the same numbers

Our own illustration: a single person dying in 2026, taxable estate equal to the amounts below, all property in the state, no lifetime gifts, and no federal deduction for the state tax (which would lower the federal figure slightly). Rates from the statutes cited above (our arithmetic; script in the data file).

At $10,000,000 the federal tax is zero and the state tax in each of these four states is about $0.9 million to $1.1 million. For most estates in the reader’s range, the state line in this table is the one that costs money.

Real estate in LLCs, DSTs and REIT shares: how the value is set

The exemption is measured against the value the estate reports, and for real estate that value is a judgment call the regulations frame but do not settle.

• The standard. 26 CFR 20.2031-1(b): fair market value is “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” The same paragraph says property shall not be returned at its local tax assessment unless that represents the fair market value.
• An interest in an LLC or partnership that owns buildings is valued as a business interest under 26 CFR 20.2031-3: “the net amount which a willing purchaser whether an individual or a corporation, would pay for the interest to a willing seller”, based on “a fair appraisal” of all the assets, including good will. The regulation points to sections 2701, 2703 and 2704 for special rules on partnership interests, buy-sell agreements and restrictions on liquidation. Whether a minority or marketability discount applies to a given interest is fact-specific and frequently litigated (our reading); this page does not take a view on any discount.
• REIT, interval fund and other fund shares. For shares with a market, 26 CFR 20.2031-2(b) uses “the mean between the highest and lowest quoted selling prices on the valuation date”. Shares of a non-traded REIT have no such market; 20.2031-2(f) then looks to net worth, earning power, dividend-paying capacity and other relevant factors (our reading of how a non-traded share fits).
• Delaware statutory trust interests are treated for income tax purposes as a share of the trust’s real estate; how that interacts with basis at death is covered in our DST guide and the step-up guide linked above.
• The scale of it. Returns filed in 2024 reported $14.03 billion of real estate partnership interests on 2,056 returns and $9.34 billion of other limited partnerships (IRS SOI Table 1).

Two federal provisions matter specifically to estates heavy in buildings or land (our reading): special use valuation for qualifying farm or business real estate can lower its value by up to $1,460,000 for 2026 deaths (section 2032A, Rev. Proc. 2025-32), and estates where a closely held business is a large share can pay the tax in installments under section 6166, where the dollar amount that sets the “2-percent portion” of deferred tax is $1,940,000 for 2026 deaths (Rev. Proc. 2025-32, section 4.51).

What a family with real estate can do with this

What the documents let you check before talking to anyone:

• Add up the federal number honestly: gross estate at fair market value (real estate appraised, not assessed), plus taxable gifts made since 1977. Compare it with $15,000,000 for a 2026 death, or $30,000,000 for a couple only if portability was or will be elected.
• Check the state line first. If either spouse lives, or owns real estate, in one of the 13 estate-tax jurisdictions above, find that state’s 2026 number. A $5,000,000 estate owes nothing federally and can owe $240,000 to $425,000 to a state in our example.
• For a married couple, diarise the 9-month date. Portability is lost if no timely Form 706 is filed for a taxable-size estate; for a smaller one, Rev. Proc. 2022-32 gives five years, not forever.
• Know who inherits, not only how much, in Pennsylvania, New Jersey, Kentucky, Nebraska and Maryland: a niece and a daughter can owe very different inheritance tax on the same bequest.
• Gather the valuation papers for LLC, partnership and fund interests: operating agreements, the sponsor’s latest net asset value per unit, and any appraisal. The regulations above are what the IRS will measure the return against.

The decision, and who makes it. Form 706 and the state returns are legal and tax filings. The professional who actually prepares and signs them is an estate-planning attorney or a CPA who files estate returns, and the questions of trusts, gifts, the New York cliff or a state move are theirs to answer for a specific family. A financial adviser does not file Form 706. Where an adviser can help is the money side of the same decision: how much of an estate is illiquid real estate, what would have to be sold to pay a state tax due in 9 months, and how gifts or a charitable remainder trust fit the family’s income needs. Families with much larger estates often coordinate all of this through a family office.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on October 12, 2026: 26 U.S.C. 2001, 2010, 2031, 2033, 2056, 2058, 2631, 6018 and 6075, United States Code 2024 edition (govinfo.gov); Public Law 119-21, section 70106 (govinfo.gov); Rev. Proc. 2025-32 and Rev. Proc. 2022-32 (irs.gov); 26 CFR 20.2010-1, 20.2010-2, 20.2031-1, 20.2031-2 and 20.2031-3 (eCFR); the IRS Estate tax and What’s new pages; IRS Statistics of Income, Table 1, Estate Tax Returns Filed in 2015 through 2024, and Table 2 (by state of residence) for 2024 (xlsx files with the scripts that read them); Revised Code of Washington 83.100.020 and 83.100.040; Oregon Revised Statutes 118.010 (2025 edition, Internet Archive copy) and the 2026 Form OR-706 instructions; New York Tax Law 952 (NYS Senate) and the Department of Taxation and Finance estate tax page; Massachusetts General Laws chapter 65C, section 2A (Internet Archive copy) and the DOR Estate Tax Guide; Minnesota Statutes 291.016 and 291.03; 35 ILCS 405/2 (Internet Archive copy) and the Illinois Attorney General fact sheet; Maryland Tax-General 7-203, 7-204 and 7-309; Connecticut General Statutes chapter 217; Vermont Statutes title 32, section 7442a; Maine Revised Statutes title 36, sections 4102 and 4103 and Maine Revenue Services; Rhode Island General Laws 44-22-1.1 (Internet Archive copy) and ADV 2025-27; Hawaii Form M-6 instructions (Rev. 2025); District of Columbia Code 47-3702 and the 2026 D-76 instructions; the Pennsylvania, New Jersey, Kentucky and Iowa revenue departments; Nebraska Revised Statutes 77-2004 to 77-2006 (Internet Archive copy). Shares, averages and worked examples are our arithmetic, with the assumptions stated. This is analysis of public documents, not investment, legal or tax advice.