The federal estate tax exemption is the amount a US person can transfer free of federal estate and gift tax, counting lifetime taxable gifts and the estate at death together — $15 million per person in 2026, with a 40% tax on amounts above it.
In plain terms
Every American gets one lifetime allowance for wealth transfer. Gifts made while alive and the estate left at death draw down the same pot, and only the amount above it is taxed. At $15 million per person — $30 million for a married couple — the federal estate tax now touches a very small number of very large estates. Almost everything in estate planning — trusts, discounts, freezes — is machinery for moving future growth out of the estate before it counts against this number.
How it works
The exemption is formally the basic exclusion amount, and it is unified: a taxable gift made in life reduces what remains at death, dollar for dollar. Not every gift counts — the annual exclusion lets anyone give $19,000 per recipient per year (2026) without touching the lifetime pot, and payments made directly to schools and medical providers are exempt without limit.
A surviving spouse can inherit the deceased spouse’s unused exemption — portability — but only if the estate files a federal estate tax return (Form 706) in time, even when no tax is owed. A parallel exemption of the same size applies to the generation-skipping transfer tax, but that one is not portable.
The current figure comes from the One Big Beautiful Bill Act (Public Law 119-21, enacted July 2025), which set the exclusion at $15 million for deaths and gifts after December 31, 2025, indexed for inflation thereafter — replacing the scheduled drop to roughly $7 million that had been written into the 2017 tax law, per the IRS’s estate and gift tax guidance.
The numbers
- Exemption, 2026: $15,000,000 per person; $30,000,000 per married couple with portability. Up from $13,990,000 in 2025.
- Tax rate above the exemption: 40% federal.
- Annual gift exclusion, 2026: $19,000 per recipient, per donor — outside the lifetime pot entirely.
- GST exemption, 2026: also $15,000,000, indexed, not portable between spouses.
- State layer: twelve states and DC levy their own estate or inheritance tax, with exemptions as low as $1 million (Oregon) — far below the federal line.
What people get wrong
That the exemption was about to collapse. For years, planning was driven by the 2026 “sunset,” when the doubled exemption was scheduled to fall by half — and it never happened; the 2025 law made the higher figure permanent and indexed. The subtler miss is portability’s paperwork: the surviving spouse gets the unused $15 million only if the first estate files Form 706 within the deadline, a filing many skip precisely because no tax is due. And the tax itself only ever applies to the excess — an $18 million estate in 2026 owes 40% of $3 million, not of $18 million, before deductions. What the exemption does not fix is basis: assets given away during life keep their old cost basis, while assets held until death get the step-up — which is why giving early is not automatically the winning move.
Related
Read more: Inheritance: The Transfer of Wealth Between Generations · Trusts: How Wealth Is Held, Protected, and Passed On · Generational Wealth: How Long Fortunes Actually Last
See also: Step-up in basis · Annual gift tax exclusion · Generation-skipping transfer tax · Dynasty trust · GRAT