Estate tax in 2026: the federal exemption and state taxes
The federal estate tax only reaches estates above $15 million per person in 2026. But 12 states and Washington, DC, have their own estate tax, one starting at $1 million, and five states tax inheritances. Here is who pays, how much, and how families plan for it.
Key facts
- The federal estate tax exemption is $15 million per person for deaths in 2026. From 2027 it rises with inflation.
- Above the exemption, the federal tax is 40%.
- Property left to a surviving spouse who is a US citizen, or to charity, is not taxed.
- A married couple can shelter up to $30 million in 2026 if the survivor keeps the first spouse’s unused exemption, which takes an estate tax return at the first death.
- 12 states and Washington, DC, have an estate tax, with exemptions from $1 million to $15 million. Five states have an inheritance tax, and Maryland has both.
How the federal estate tax works
The estate tax is a tax on passing property on at death. It is paid by the estate, before the heirs receive their shares, and it is figured in four steps:
- Add up the gross estate: everything the person owned or had certain interests in at death, at fair market value. That includes cash and investments, real estate, life insurance they owned, business interests, annuities and some trusts. Property in a revocable living trust counts too.
- Subtract deductions: mortgages and other debts, funeral and administration expenses, property passing to a surviving spouse, and gifts to charity. The result is the taxable estate.
- Add back taxable gifts made during life, meaning gifts above the annual exclusion.
- Apply the exemption. A credit covers the first $15 million for deaths in 2026. Every dollar above that is taxed at 40%.
Example. Ana is single and dies in 2026 with a taxable estate of $16 million. She made no taxable gifts during her life. The first $15 million is covered by the exemption, so her estate owes 40% of the remaining $1 million: $400,000.
The executor reports the estate on IRS Form 706, due nine months after the death. Filing Form 4768 gives an automatic six-month extension to file, but the tax is still due at nine months unless the IRS approves a separate request for more time to pay. A return is required when the gross estate plus lifetime taxable gifts is above the exemption, and it can be worth filing even when no tax is due, as the section on couples explains. The executor’s checklist covers the other returns due after a death.
The exemption by year
| Year of death | Exemption per person | Top rate |
|---|---|---|
| 2024 | $13,610,000 | 40% |
| 2025 | $13,990,000 | 40% |
| 2026 | $15,000,000 | 40% |
| 2027 and later | $15 million, adjusted for inflation | 40% |
A federal law signed on July 4, 2025, Public Law 119-21, set the exemption, officially the basic exclusion amount, at $15 million for 2026 and indexed it for inflation after that. Under the previous law, the higher exemption in place since 2018 was due to expire after 2025, which would have cut it roughly in half. The new amount has no expiration date, although Congress can change it at any time.
The same exemption covers gifts you make during your life and your estate at death. Gifts of up to $19,000 per recipient in 2026, or $38,000 from a married couple who split their gifts, do not use any of it.
Married couples: marital deduction and portability
The unlimited marital deduction
Property left to a surviving spouse who is a US citizen passes free of federal estate tax, with no dollar limit. The tax is postponed, not cancelled: whatever the survivor still owns at their own death counts in their estate.
If your spouse is not a US citizen
The marital deduction does not apply to property left to a spouse who is not a US citizen, unless it passes through a qualified domestic trust (QDOT). Gifts to a non-citizen spouse during your life are tax-free up to $194,000 in 2026.
Portability: keeping the first spouse’s unused exemption
When the first spouse dies, the part of their exemption they did not use can pass to the survivor. It is called the deceased spousal unused exclusion, or DSUE. If the first spouse dies in 2026 and leaves everything to the survivor, none of their $15 million is used, so the survivor can add it to their own exemption and shelter up to $30 million.
The catch is paperwork. The executor must elect portability on a complete, timely Form 706, even when no tax is due, and the election cannot be undone. Estates that were not otherwise required to file can still make the election up to five years after the death under IRS Revenue Procedure 2022-32. The survivor can only use the unused exemption of their last spouse to die.
State estate taxes have their own rules. Illinois does not allow portability, while Maryland and Hawaii allow it under their own conditions. That is why couples in states with an estate tax often use a credit shelter trust, described below, instead.
State estate taxes in 2026
Twelve states and Washington, DC, tax estates, most of them at far lower levels than the federal government. Exemptions and rates for deaths in 2026:
| State | 2026 exemption | Rates | Worth knowing |
|---|---|---|---|
| Connecticut | $15,000,000 | 12% | Matches the federal exemption. Combined estate and gift tax is capped at $15 million |
| District of Columbia | $4,988,400 | 11.2% to 16% | Adjusted for inflation each year |
| Hawaii | $5,490,000 | 10% to 20% | Allows portability between spouses, up to $5.49 million |
| Illinois | $4,000,000 | About 28.6% on the first $1 million above the exemption | No portability between spouses. A $5 million estate owes $285,714 |
| Maine | $7,160,000 | 8% to 12% | Adjusted for inflation each year |
| Maryland | $5,000,000 | Up to 16% | Also has an inheritance tax. Allows portability with a Maryland election |
| Massachusetts | $2,000,000 | 7.2% to 16% | A $99,600 credit for every estate means estates of $2 million or less owe nothing |
| Minnesota | $3,000,000 | 13% to 16% | Fixed at $3 million since 2020 |
| New York | $7,350,000 | 3.06% to 16% | A taxable estate above 105% of the exemption, $7,717,500 in 2026, loses the exemption entirely |
| Oregon | $1,000,000 | 10% to 16% | The lowest threshold in the country |
| Rhode Island | $1,838,056 | 7.2% to 16% | Adjusted for inflation each year |
| Vermont | $5,000,000 | 16% | Fixed at $5 million since 2021 |
| Washington | $3,000,000 | 10% to 20% | For deaths from July 1, 2026. For deaths earlier in 2026, the exemption was $3,076,000 and the top rate 35% |
State returns have their own forms and deadlines. Connecticut’s, for example, is due six months after the death, three months sooner than the federal return.
State inheritance taxes
An inheritance tax is charged on what each person receives, and the rate depends on how closely they were related to the person who died. Spouses pay nothing in all five states that have one. Children pay nothing in Kentucky, Maryland and New Jersey, 1% above $100,000 in Nebraska, and 4.5% in Pennsylvania.
| State | Pays nothing | Others pay |
|---|---|---|
| Kentucky | Spouse, parents, children, stepchildren, grandchildren, brothers and sisters, and, for deaths since January 1, 2026, nieces and nephews | 4% to 16% for sons- and daughters-in-law, aunts, uncles and great-grandchildren; 6% to 16% for everyone else, after a small exemption |
| Maryland | Spouse, children and other descendants and their spouses, stepchildren, parents, stepparents, grandparents, siblings, registered domestic partners and charities | 10% |
| Nebraska | Spouse, and heirs under age 22 | 1% above $100,000 for children, parents, siblings and other close family; 11% above $40,000 for aunts, uncles, nieces and nephews; 15% above $25,000 for everyone else |
| New Jersey | Spouse, civil union or domestic partner, parents, grandparents, children, stepchildren, grandchildren and other descendants, and charities | 11% to 16% above $25,000 for siblings and a child’s spouse; 15% to 16% for everyone else |
| Pennsylvania | Spouse, charities, and a parent inheriting from a child aged 21 or younger | 4.5% for children, grandchildren, parents and other direct heirs; 12% for siblings; 15% for everyone else |
Pennsylvania gives a 5% discount when the tax is paid within three months of the death. Iowa repealed its inheritance tax for deaths on or after January 1, 2025.
Which state can tax your estate
In general, the state where you live when you die taxes your estate, and a state where you own real estate can tax that property even if you live elsewhere. A resident of a state with no estate tax, such as Florida, can still owe estate tax to the state where they keep a vacation home. Inheritance taxes work the same way: Pennsylvania, for example, taxes what its residents leave wherever the heir lives, except real estate and other physical property located in another state.
How families reduce estate tax
- Annual gifts. Gifts of up to $19,000 per recipient in 2026, $38,000 from a married couple, do not count against the exemption.
- Tuition and medical bills. Paying them directly to the school or the provider is not a taxable gift, on top of the annual exclusion.
- Charity. Gifts to qualified charities, during life or at death, are deductible.
- Portability or a credit shelter trust for married couples, so the first spouse’s exemption is not wasted. In states without portability, the credit shelter trust is the usual tool.
- An irrevocable life insurance trust keeps a policy’s payout out of the taxable estate.
- Other irrevocable trusts, such as spousal lifetime access trusts, move assets and their future growth out of a large estate.
A revocable living trust does not cut estate tax on its own, because you keep control of the property. It can, however, be drafted to set up a credit shelter trust when the first spouse dies. See revocable vs irrevocable trusts.
Near your state’s exemption? If your estate is within reach of your state’s limit, or above $15 million, an estate planning attorney can usually save your heirs far more than the fee.
Estate tax and your heirs’ income tax
For most families, the bigger tax question is capital gains, not estate tax. Heirs generally take a “stepped-up” basis: the property’s value on the date of death. If your parents bought their house for $150,000 and it is worth $600,000 when the last of them dies, the heirs’ basis is $600,000, and they owe little or no capital gains tax if they sell soon after. In community property states, the surviving spouse’s half of the community property also gets a new basis when the first spouse dies.
Giving appreciated property away during your life gives up that step-up, because the recipient takes over your original basis. That is one reason families well below the estate tax threshold often keep appreciated assets until death.
Estate tax aside, is your plan in place?
Six questions show whether a will, a living trust or an attorney fits your family.
Take the quizFAQ
Do heirs pay the estate tax?
No. The federal estate tax is paid by the estate, out of its assets, before the heirs receive their shares, and the executor files the return. Inheritance taxes, in the five states that have one, are charged on each heir’s share and are usually settled before the heir receives the property.
Is life insurance included in the taxable estate?
Yes, if the person who died owned the policy or the payout goes to their estate. The payout is generally not taxable income for the beneficiary. Larger estates often hold life insurance in an irrevocable life insurance trust to keep it out of the estate.
Do I have to file an estate tax return if no tax is owed?
Only if the gross estate plus lifetime taxable gifts is above the filing threshold, $15 million for deaths in 2026. Many surviving spouses file anyway to keep the unused exemption through portability. State estate tax returns have their own, often much lower, thresholds.
Will the $15 million exemption go down?
The law that set it has no expiration date, and from 2027 it rises with inflation. Congress can still change it. The IRS announces each year’s amount, usually in the fall of the year before.
Do I pay income tax on an inheritance?
Generally not federal income tax on the inheritance itself. Income the property earns after the death is taxable, and so are withdrawals from an inherited traditional IRA or 401(k).
Which states have no estate or inheritance tax?
34 states have neither, including California, Florida and Texas. The 16 states that have one or both, plus Washington, DC, are listed in the tables above.
Sources
- IRS: Estate tax
- IRS: What’s new, estate and gift tax
- IRS: Frequently asked questions on estate taxes
- IRS: Instructions for Form 706 and About Form 4768
- IRS: Frequently asked questions on gift taxes
- IRS: Revenue Procedure 2025-32 (2026 inflation adjustments)
- IRS: Revenue Procedure 2022-32 (late portability elections), Internal Revenue Bulletin 2022-30
- IRS Publication 590-B: Distributions from IRAs
- 26 U.S. Code, Cornell Law School: §2010 (unified credit and portability), §2053 (expenses and debts), §2056 (marital deduction), §1014 (basis of inherited property), §101 (life insurance) and §102 (inheritances)
- Tax Foundation: Estate and inheritance taxes by state, 2026 (October 2026)
- Connecticut Department of Revenue Services: Estate and gift taxes
- District of Columbia Office of Tax and Revenue: 2026 Form D-76 instructions
- Hawaii Department of Taxation: Form M-6 instructions
- Illinois Attorney General: Estate tax fact sheet
- Maine Revenue Services: Estate tax
- Maryland: Tax-General §7-309 (estate tax), §7-203 (inheritance tax exemptions) and Registers of Wills, Inheritance tax
- Massachusetts Department of Revenue: Estate tax guide and TIR 24-4
- Minnesota Department of Revenue: Estate tax filing requirement and Estate tax rates
- New York: Department of Taxation and Finance, Estate tax and Tax Law §952
- Oregon: Department of Revenue, Estate transfer tax and ORS 118.010 (rates)
- Rhode Island: Division of Taxation Advisory 2025-27 and General Laws §44-22-1.1
- Vermont: Department of Taxes, Estate tax and 32 V.S.A. §7442a
- Washington: Department of Revenue, Estate tax tables and Senate Bill 6347 (2026)
- Kentucky: Revised Statutes §140.070 and 2026 House Bill 869
- Nebraska Revised Statutes §77-2004, §77-2005 and §77-2006
- New Jersey Division of Taxation: Inheritance tax rates and beneficiary classes
- Pennsylvania: Department of Revenue, Inheritance tax and Delaware County Register of Wills, Inheritance tax
- Iowa Department of Revenue: Inheritance tax
OakTrust.com provides general information, not tax or legal advice. Tax laws, exemptions and rates change often, and state rules have details this page does not cover. For advice on your situation, talk to an estate planning attorney or a tax adviser.