Understanding Federal Estate Tax in 2026: A Complete Guide

What is federal estate tax, and who actually owes it?

Federal estate tax is a tax on the total value of everything a person owned at death — real estate, investment accounts, retirement accounts, life insurance proceeds, business interests, and personal property — before any of it passes to heirs. It's paid by the estate itself, not by the people receiving the inheritance. That's the key difference from inheritance tax, which a handful of states charge separately: inheritance tax is owed by the beneficiary and depends on their relationship to the deceased, while estate tax is owed by the estate and depends only on its total value.

For 2026, the federal basic exclusion amount is $15,000,000 per person — verified directly against IRS Revenue Procedure 2025-32, which implemented the One Big Beautiful Bill Act's increase from 2025's $13,990,000. A married couple can effectively shelter up to $30,000,000 through portability (more on that below). Because the exemption is this high, the large majority of estates owe no federal estate tax at all — but “my estate is nowhere near $15 million” is a judgment call worth actually running through the numbers, not assuming, especially once a house, a life insurance payout, and retirement accounts are all added into the same total.

How is the taxable estate actually calculated?

The math isn't “total estate value minus $15,000,000, taxed at 40%.” It follows the actual structure of IRS Form 706:

• Start with the gross estate — everything owned at death, valued at fair market value.
• Subtract itemized deductions: debts and expenses, funeral expenses, administration expenses, the (unlimited) marital deduction for anything left to a surviving spouse, and charitable bequests. What remains is the taxable estate.
• If the estate also owes a state estate tax, that state tax is calculated first and then deducted from the federal base under IRC §2058 — state tax paid reduces the amount the federal government taxes.
• Federal tax itself is a tentative tax minus a credit, not a simple subtraction. The 26 U.S.C. §2001(c) unified rate schedule (18% up to 40%, topping out on anything over $1,000,000) is applied to the full taxable estate starting from $0 — producing the tentative tax. Then a credit — the same rate schedule applied to the applicable exclusion amount ($15,000,000 for 2026, plus any portability amount) — is subtracted from that tentative tax. What's left is what's actually owed.

Worked example: a single decedent with an $18,000,000 taxable estate in 2026, in a state with no estate tax of its own. The tentative tax on $18,000,000 is $345,800 (the tax on the first $1,000,000) plus 40% of the remaining $17,000,000 — $7,145,800 total. The credit is the tentative tax on the $15,000,000 exclusion: $345,800 plus 40% of $14,000,000 — $5,945,800. Federal estate tax owed: $7,145,800 − $5,945,800 = $1,200,000, which works out to exactly 40% of the $3,000,000 above the exclusion — the top bracket is really the only one that matters for any estate large enough to owe tax in the first place, since $1,000,000 is such a small slice of a $15,000,000 exemption.

One detail this simplified version leaves out deliberately: lifetime gifts above the annual exclusion amount reduce the exemption available at death, because gift tax and estate tax share a single unified lifetime exemption (26 U.S.C. §2001(b)). If significant lifetime gifting has happened, the real number needs a professional calculation, not a simplified estimate.

The DueMATH estate tax calculator runs this exact tentative-tax-minus-credit method rather than the simplified shortcut, including the state-tax deduction step when applicable.

Portability: protecting a surviving spouse's exemption

When a married person dies without using their full $15,000,000 exclusion, the leftover amount — the Deceased Spousal Unused Exclusion, or DSUE — doesn't have to be lost. Through an election called portability, the surviving spouse can add the deceased spouse's unused exclusion to their own, potentially sheltering up to $30,000,000 combined.

The catch: portability is never automatic. It requires a complete, timely Form 706 filed for the first spouse's estate electing portability — even when no federal tax is owed on that first estate at all. Missing the deadline forfeits the unused exclusion permanently. This is one of the most common estate-planning mistakes: a family sees that the first spouse's estate is well under the exemption, assumes no filing is needed, and skips Form 706 — only to find years later that the surviving spouse's exclusion is stuck at their own $15,000,000, not the $30,000,000 it could have been.

The DSUE amount is also capped at whatever the deceased spouse's own basic exclusion was in their year of death, not today's figure. A spouse who died in 2019 can carry over at most $11,400,000 of DSUE — that year's exclusion — even though the exclusion is $15,000,000 today. The estate tax calculator models this cap directly and shows a side-by-side comparison of the estate's tax with and without portability, so the real dollar value of filing that Form 706 election is visible rather than abstract.

Does your state also tax the estate?

Federal estate tax is only half the picture. As of 2026, twelve states plus the District of Columbia levy their own separate estate tax, charged in addition to (not instead of) federal estate tax — and every one of these states sets its exemption far below the federal $15,000,000 threshold, so an estate that owes nothing federally can still owe state estate tax.

Two are worth calling out specifically. New York has a “cliff”: if the taxable estate exceeds 105% of the exemption, the entire exemption is lost and the full estate value is taxed from the first dollar — not just the amount over the threshold. An estate just barely over that 105% line can owe dramatically more than one just under it. Washington's exemption and top rate are date-sensitive within 2026 itself: the top rate was temporarily 35% for deaths between July 1, 2025 and June 30, 2026, before a new law (SB 6347) rolled it back to 20% with a $3,000,000 exemption for deaths on or after July 1, 2026. Getting the date of death right matters as much as getting the estate value right in a state like this.

Maryland is a special case: it charges both its own estate tax (in the table above) and a separate inheritance tax, making it the only state with both. See the inheritance tax guide for how that side works.

Ways to reduce estate tax exposure

For estates large enough that federal or state estate tax is a real possibility, a few well-established approaches come up repeatedly in estate planning:

• File Form 706 for portability, even at $0 owed. As covered above, this is the single most commonly missed step — and the cheapest way to potentially double a married couple's combined exclusion.
• Lifetime gifting. Gifts within the annual exclusion amount don't reduce the lifetime estate/gift exemption at all; larger gifts do reduce it, but move future appreciation of the gifted asset out of the taxable estate entirely.
• Irrevocable trusts. Assets moved into certain irrevocable trusts can be removed from the taxable estate, though the details depend heavily on the trust structure and timing.
• The marital deduction. Assets left to a surviving spouse (who is a U.S. citizen) are unlimited and fully deductible from the taxable estate — though this typically defers tax to the second death rather than eliminating it, which is exactly why portability matters so much for that second estate.
• Charitable bequests. Amounts left to qualified charities are fully deductible from the taxable estate, with no cap.

None of these are one-size-fits-all, and the paperwork deadlines (Form 706 is due nine months after death, with one six-month extension available) are unforgiving. For any estate near or over these thresholds, this is genuinely worth a conversation with an estate attorney or CPA rather than a DIY project.

Frequently asked questions