Estate Tax 2026: Exemption, Portability and Planning Decisions

The 2026 federal estate and gift tax basic exclusion is $15 million per person, and the annual gift exclusion is $19,000 per recipient. For married couples, coordinate ownership, prior gifts, and the portability election to determine the available combined exclusion. IRS estate-tax guidance, gift-tax questions.

Estate planning can matter well below the $15 million federal exclusion. State estate taxes, the basis of inherited assets, retirement distributions, and the executor’s filing obligations can all affect what heirs receive. The federal examples here assume U.S. citizens or residents unless stated otherwise.

Understand the federal threshold before estimating tax

For a 2026 death, the federal filing test generally combines the gross estate with adjusted taxable gifts and any applicable specific exemption. A filing requirement is different from a final tax bill: deductions and credits enter the tax calculation. Assets passing outside probate can still belong in the gross estate. IRS estate-tax guidance

Federal item	2026 amount or rule
Basic estate and gift exclusion	$15,000,000 per person
Annual gift exclusion	$19,000 per donor, per recipient, for qualifying gifts
Top estate-tax rate	40%
Normal Form 706 deadline	9 months after death
Automatic filing extension available through Form 4768	6 months

The 2026 Form 706 instructions supply the tax computation and filing rules. A filing extension does not automatically extend the payment deadline.

For a $16 million taxable estate, with no prior taxable gifts, deceased-spouse exclusion, or additional adjustments, the $1 million excess over the $15 million exclusion produces $400,000 federal estate tax. Establish the taxable estate after deductions and account for gifts and credits before using that simplified top-rate calculation.

Calculate the unused exclusion for portability

Portability transfers a deceased spouse’s unused exclusion, or DSUE, to the survivor through a properly filed Form 706. File for the election even when no estate tax is due if the unused amount is to be preserved. Eligible estates without a mandatory filing requirement can use the simplified late-election procedure through the fifth anniversary of death; estates required to file follow the ordinary deadlines and applicable relief procedures. Form 706 instructions.

Consider two deliberately simplified 2026 examples with no prior taxable gifts:

• A spouse leaves $5 million to children, with no deductions assumed. That uses $5 million of the $15 million exclusion, leaving $10 million potentially portable.
• A spouse leaves $5 million entirely to a surviving U.S.-citizen spouse, and the transfer qualifies for the marital deduction. The taxable transfer after that deduction may be zero, leaving the full $15 million potentially portable.

The marital deduction leaves more unused exclusion in the second example. Have the executor retain the filed return, valuations, and election records, and use that documented DSUE in the survivor’s future planning. Ownership and beneficiary choices determine which calculation applies.

Check state exposure using the date of death

These selected state examples show why the estate review needs both the jurisdiction and date of death. Check residence and the location of property before deciding which returns may be required.

Jurisdiction and applicable period	Threshold or exclusion	Important distinction
Oregon	$1,000,000	Filing generally starts at $1 million; tax applies above it, with marginal rates of 10%–16%
Massachusetts, deaths from 2023 onward	$2,000,000	Filing test includes gross estate plus adjusted taxable gifts; separate credit calculation
New York, 2026 deaths	$7,350,000	Basic exclusion; credit phases out above the exclusion
Washington, January–June 2026 deaths	$3,076,000	Rates of 10%–35% on Washington taxable estate
Washington, July–December 2026 deaths	$3,000,000	Rates of 10%–20% on Washington taxable estate

Sources: Oregon filing guidance, Oregon tax-rate explanation, Massachusetts guide, New York 2026 exclusion and Washington tables.

New York’s credit is unavailable when the taxable estate exceeds 105% of its basic exclusion. For 2026, 105% of $7.35 million is $7,717,500. That phaseout makes a simple “tax only the amount above the exclusion” estimate unreliable. New York Tax Law Section 952

For a July 2026 Washington estate with $6 million before the exclusion, assuming no other deductions or allocation adjustments, the $3 million exclusion leaves $3 million taxable. The brackets produce $390,000: $100,000 on the first million, $140,000 on the second, and $150,000 on the third. Apply the estate’s actual residence, property, and deduction rules to complete the return.

Treat gift reporting and gift tax as different questions

Giving more than $19,000 to one person does not automatically require an immediate tax payment. A reportable taxable gift can use part of the donor’s available lifetime exclusion. For example, a qualifying $50,000 cash gift to one adult child in 2026 generally leaves $31,000 after the annual exclusion. That amount ordinarily requires gift-tax reporting even when available exclusion covers the tax. IRS gift-tax questions

Two spouses can each make a $19,000 qualifying gift to the same recipient, totaling $38,000. Do not confuse that with electing to split a gift made by one spouse; gift splitting can require Form 709. Direct payments of qualifying tuition to the school or qualifying medical costs to the provider have separate exclusions. The tuition exclusion does not cover room, board or books. Form 709 instructions

Keep a recipient-by-recipient ledger recording the date, amount, ownership of the money and any election. A single annual total does not show whether one recipient exceeded the exclusion.

Use the 529 five-year election carefully

A donor can elect to spread a qualifying $95,000 contribution over five years using the $19,000 annual exclusion; two donors may potentially contribute $190,000 with the appropriate elections. This is an allocation of gifts across years, not five extra annual exclusions. Washington’s 529 program guidance

File the required gift-tax election and track other gifts to the beneficiary during the five-year period. If the donor dies before it ends, the portion allocated after death is generally included in the gross estate. Keep the election and allocation schedule with the estate records. 26 U.S.C. Section 529.

Compare education funding needs and your own liquidity before accelerating a contribution. The 529 savings guide covers the account’s qualified-use rules separately.

Compare lifetime gifts with inherited basis

Inherited property generally receives a basis tied to date-of-death fair market value, with exceptions and alternative valuation rules. That can be a decrease as well as an increase. Gifted property generally follows different basis rules. IRS Publication 551

Shares purchased for $500,000, worth $3 million at death, and eligible for a $3 million inherited basis would produce a $100,000 gain on a later $3.1 million sale, before selling costs. Retain the valuation and basis support so the beneficiary can substantiate the gain calculation.

Compare the potential basis benefit with concentration risk, spending needs, charitable intentions, and estate-tax exposure. Model both a lifetime transfer and retention through death before making an irreversible gift. Preserve original purchase records along with any later valuation.

Coordinate retirement accounts and the implementation file

Inherited retirement accounts do not simply become tax-free because the estate is below $15 million. Many designated beneficiaries who are not eligible designated beneficiaries must empty an inherited IRA by the end of the tenth year after death. Annual distributions can also be required when the owner died on or after the required beginning date. Spouses and other eligible designated beneficiaries have different options. IRS Publication 590-B

For a $1 million inherited account, ten equal $100,000 withdrawals provide a simple starting scenario before growth. Compare that with distributions timed around the beneficiary’s other income while meeting any annual requirement and final deadline. Document the owner’s date of death and required-beginning-date status first.

Finish the plan with an asset inventory, prior gift returns, beneficiary records, trust documents, valuations and a filing calendar. Evaluate proposed trusts by their actual ownership, retained powers, costs and tax treatment; the word “irrevocable” alone does not prove exclusion from an estate. Use estate planning basics to coordinate documents with the people responsible for carrying them out.

Sources

Amounts and procedures were checked November 3, 2026 against IRS Form 706 instructions, IRS gift-tax guidance, and the state authorities linked above. Worked examples state their simplifying assumptions; use the actual estate inventory, prior gifts, deductions, and elections for a return.