The Federal Estate Tax Exemption Is $15 Million in 2026 — And Now Permanent

The federal estate tax exemption is $15 million per person for 2026 — up from $13.99 million in 2025, according to the IRS’s 2026 inflation adjustments. A married couple can shield up to $30 million combined using portability.

This isn’t just another annual inflation bump. The One Big Beautiful Bill Act (OBBB), signed into law in 2025, made the $15 million exemption permanent. Before that law passed, the doubled exemption from the 2017 Tax Cuts and Jobs Act was scheduled to sunset at the end of 2025, which would have cut the exemption roughly in half starting in 2026.

That sunset no longer applies. Section 70106 of the OBBB rewrote the relevant part of the tax code to set the exemption at $15 million starting in 2026, with no new expiration date attached — the same law that reshaped the 2026 federal income tax brackets touched estate and gift tax rules too.

Why This Almost Didn’t Happen

For most of 2024 and 2025, estate planners were telling clients to prepare for the exemption to roughly halve. The 2017 tax law had temporarily doubled the exemption, but that provision was written to expire after 2025 unless Congress acted.

Without the OBBB, the exemption would have dropped to somewhere around $7 million to $7.5 million per person for 2026 — still a large number, but one that would have pulled a meaningfully larger group of estates (people with a paid-off home, a retirement account, some investments, and a life insurance policy) into taxable territory. The OBBB avoided that entirely by locking in the higher number and making it permanent rather than temporary.

How the Exemption Actually Works

The estate tax exemption is a lifetime, unified exemption — it covers both what you give away while you’re alive (above the annual gift exclusion) and what you leave behind at death. Every taxable gift you make during your life reduces the exemption available to your estate later.

Amounts above the exemption are taxed at a top rate of 40%. Because the exemption is so high, this only ever applies to genuinely large estates — real estate, business interests, retirement accounts, investment portfolios, and life insurance proceeds not held in an irrevocable trust all count toward the total.

Portability lets a surviving spouse use any unused exemption from a deceased spouse, provided the executor files an estate tax return (Form 706) electing portability, even if no tax is owed. This is how a married couple can shield up to $30 million combined rather than being limited to $15 million if the first spouse’s unused exemption simply disappears.

Assets that get a step-up in basis at death (most inherited property does) are a related piece of this — heirs generally don’t owe capital gains tax on appreciation that happened before the original owner died. I cover how that interacts with capital gains tax rates in more detail separately, since it’s one of the more valuable and least understood pieces of estate planning.

The Annual Gift Tax Exclusion Is a Separate, Smaller Number

The annual gift tax exclusion is $19,000 per recipient for 2026, unchanged from 2025. You can give this amount to as many people as you want each year — no limit on the number of recipients — without touching your $15 million lifetime exemption or filing a gift tax return.

Married couples can combine their exclusions through “gift splitting,” letting them give up to $38,000 per recipient per year tax-free. A grandparent with four grandchildren, for example, could give away $76,000 a year ($19,000 x 4) without using any of their lifetime exemption.

Two Examples

Mark is unmarried and has an estate worth $18 million when he dies in 2026. His exemption covers the first $15 million tax-free. The remaining $3 million is taxed at 40%, for an estate tax bill of $1.2 million — before considering any deductions, charitable gifts, or prior taxable gifts that would have already used up part of his exemption.

Sarah and Tom are married with a combined estate of $22 million. Sarah dies first in 2026 without having used any of her exemption; her executor files Form 706 and elects portability, preserving her full $15 million for Tom. When Tom dies years later, he has his own $15 million exemption plus Sarah’s $15 million, giving him $30 million in total shelter — more than enough to cover the $22 million estate with no federal estate tax owed at all.

State Estate and Inheritance Taxes Are a Different Story

The $15 million figure is a federal number only. Roughly a dozen states, plus the District of Columbia, impose their own estate or inheritance tax with exemption thresholds far below the federal level — some as low as $1 million to $2 million.

If you live in (or own property in) one of these states, a much smaller estate than $15 million can still trigger a state-level tax, even though it owes nothing federally. This is worth checking directly with your state’s department of revenue, since the list of states and their thresholds changes periodically.

For estates with a large share of net worth tied up in a house, a business, or retirement accounts, liquidity to actually pay a state-level tax bill (or cover expenses while an estate is settled) is a real practical concern — life insurance held in an irrevocable trust is one of the more common tools used to solve for that without forcing an estate to sell off assets. And if part of what you’re leaving behind is a retirement account, it’s worth pairing this with a look at how the inherited IRA 10-year distribution rule affects your heirs, since that’s a separate set of rules from the estate tax exemption entirely.

Common Issues to Watch Out For

Not filing for portability. I see this one a lot. If the first spouse dies and the estate is under the filing threshold, families often skip filing Form 706 to save the accountant’s fee — but that also forfeits the portability election, permanently losing the deceased spouse’s unused exemption.

Assuming lifetime gifts don’t count. Large gifts made years before death still reduce the exemption available at death, even though they were tax-free at the time under the annual exclusion or by using part of the lifetime exemption.

Confusing federal and state thresholds. An estate well under $15 million can still owe state estate or inheritance tax in states with their own, much lower exemption levels.

Overlooking illiquid asset valuation. Business interests, real estate, and closely-held company shares can be hard to value precisely, and disputes with the IRS over valuation are one of the more common sources of estate tax controversy.

Not revisiting an old estate plan. Trusts and wills drafted years ago — especially ones written when the exemption was much lower — can contain formula clauses that no longer make sense at $15 million. If your plan predates the OBBB, it’s worth a review, and it’s a good excuse to revisit your broader personal finance plan at the same time rather than looking at the estate documents in isolation.

The 2027 Exemption and What to Expect for 2028

2027 is the first year the $15 million exemption is indexed for inflation, and the number is now official: the IRS’s 2027 inflation adjustments set it at $15,480,000 per person, or $30,960,000 for a married couple using portability.

The annual gift tax exclusion also rises, from $19,000 to $20,000 per recipient for 2027, so a married couple splitting gifts can give $40,000 per person. For 2028, the IRS will set the next figures in fall 2027; the gift exclusion only moves in $1,000 steps, so it may hold at $20,000.