Estate Tax Exemption 2026: $15M/$30M Now Permanent (No Sunset)
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Estate Tax Exemption 2026: $15M/$30M Now Permanent (No Sunset)
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
One of the most significant provisions in the One Big Beautiful Bill for high-net-worth families is the permanent establishment of the federal estate tax exemption at approximately ~$15 million per individual and ~$30 million for married couples filing jointly. Under the original Tax Cuts and Jobs Act (TCJA), the doubled exemption was temporary and scheduled to sunset in 2026, which would have cut the exemption roughly in half. The OBBB eliminates that sunset entirely, making the current high exemption levels permanent.
This guide explains what the permanent exemption means, who is affected, how portability works, and what estate planning strategies to consider going forward.
Background: How We Got Here
Pre-TCJA (Before 2018)
Before the TCJA, the federal estate tax exemption was approximately $5.49 million per individual (~$10.98 million for married couples). Estates exceeding this threshold were subject to a 40% federal estate tax on the excess.
TCJA (2018-2025)
The TCJA roughly doubled the exemption, raising it to approximately $11.18 million per individual in 2018. With annual inflation adjustments, the exemption reached approximately $13.99 million per individual ($27.98 million MFJ) for the 2025 tax year. However, this increase was temporary — it was scheduled to sunset after 2025, reverting to the pre-TCJA level (adjusted for inflation, approximately ~$7 million per individual).
OBBB (2026 Forward)
The OBBB makes the doubled exemption permanent at approximately $15 million per individual ($30 million MFJ) for the 2026 tax year. The exemption will continue to be adjusted annually for inflation. There is no sunset clause.
2026 Estate Tax Exemption: Key Numbers
| Feature | 2026 Amount |
|---|---|
| Individual exemption | ~$15,000,000 |
| Married couple (with portability) | ~$30,000,000 |
| Top estate tax rate | 40% |
| Annual gift tax exclusion | ~$19,000 per recipient |
| Lifetime gift tax exemption | Unified with estate tax (~$15,000,000) |
What “Permanent” Means
Under the OBBB, the ~$15 million exemption is written into the tax code without an expiration date. Unlike the TCJA version, which had a built-in sunset date, the OBBB provision remains in effect indefinitely unless future legislation changes it. Congress can always modify the tax code, but no scheduled reduction is on the books.
Who Is Affected?
Estates Under ~$15 Million (Single) / ~$30 Million (MFJ)
No federal estate tax. If your estate is valued below the exemption, your heirs pay no federal estate tax. This applies to the vast majority of Americans — according to IRS data, fewer than ~0.1% of decedents have estates that exceed the exemption threshold.
Estates Over ~$15 Million (Single) / ~$30 Million (MFJ)
Federal estate tax applies at 40% on the excess. For example, a single individual with an estate valued at ~$20 million would owe estate tax on ~$5 million (the amount exceeding the ~$15 million exemption). At the 40% rate, the tax would be approximately ~$2 million.
What This Means vs. the Scheduled Sunset
If the OBBB had not passed and the TCJA had been allowed to sunset, the 2026 exemption would have dropped to approximately $7 million per individual ($14 million MFJ). That would have exposed many more estates to the tax. The OBBB effectively preserves the status quo and removes the uncertainty that had driven aggressive estate planning in 2024-2025.
How the Estate Tax Works
Calculating the Tax
- Determine the gross estate: Total value of all assets owned at death (real estate, investments, business interests, retirement accounts, life insurance, personal property)
- Subtract allowable deductions: Funeral expenses, debts, administrative costs, charitable bequests, and the unlimited marital deduction (transfers to a surviving spouse)
- Calculate the taxable estate: Gross estate minus deductions
- Apply the exemption: Subtract the ~$15 million exemption
- Apply the 40% tax rate: The remaining amount is taxed at 40%
Example:
| Step | Amount |
|---|---|
| Gross estate | ~$22,000,000 |
| Deductions (debts, expenses) | ~$500,000 |
| Taxable estate | ~$21,500,000 |
| Estate tax exemption | ~$15,000,000 |
| Amount subject to tax | ~$6,500,000 |
| Federal estate tax (40%) | ~$2,600,000 |
Unified Gift and Estate Tax
The estate tax exemption is unified with the lifetime gift tax exemption. This means that any portion of the ~$15 million exemption used during your lifetime to shelter gifts above the annual exclusion reduces the amount available at death.
Example: If you gave ~$3 million in lifetime gifts above the annual exclusion, your remaining estate tax exemption at death would be approximately ~$12 million.
Portability Between Spouses
Portability allows a surviving spouse to use any unused portion of the deceased spouse’s estate tax exemption, effectively doubling the exemption for married couples.
How Portability Works
- The first spouse dies with an estate of ~$8 million
- The ~$15 million exemption covers the entire estate, leaving ~$7 million unused
- The executor files IRS Form 706 (Estate Tax Return) and elects portability
- The surviving spouse’s exemption becomes ~$15 million (own) + ~$7 million (deceased spouse’s unused) = ~$22 million
Critical Requirement: File Form 706
Portability is not automatic. The executor must file Form 706 within 9 months of the first spouse’s death (with a possible 6-month extension) and elect portability on the return. If Form 706 is not filed, the unused exemption is lost forever.
This is one of the most common estate planning oversights. Even if no estate tax is due (because the estate is under the exemption), filing Form 706 to preserve the unused exemption for the surviving spouse is strongly recommended for any married couple with significant assets.
Portability and the OBBB
Under the permanent ~$15 million exemption, the maximum portable exemption is ~$15 million (if the first spouse used none of their exemption). This means a surviving spouse could have access to up to ~$30 million in combined exemptions — enough to shield very substantial estates from taxation.
Impact on Estate Planning
The permanent exemption fundamentally changes the estate planning landscape in several ways.
Reduced Urgency for Aggressive Planning
In 2024 and 2025, many high-net-worth families rushed to use the doubled exemption before the expected sunset. Strategies included:
- Large irrevocable trusts funded with gifts up to the exemption amount
- Grantor Retained Annuity Trusts (GRATs) to transfer wealth at reduced gift tax cost
- Family Limited Partnerships (FLPs) to discount asset values for gift tax purposes
With the exemption now permanent, the urgency to “use it or lose it” has largely evaporated. Families can plan more deliberately without racing against a sunset deadline.
Irrevocable Gifts Already Made
Taxpayers who made large irrevocable gifts in 2024-2025 to use the exemption before the expected sunset do not get those gifts “back.” The gifts were completed and the exemption was used. However, since the exemption remains high, these taxpayers are not penalized — they simply used exemption that would have been available anyway.
Focus Shifts to Income Tax Planning
With the estate tax affecting very few families, advisors are increasingly focused on income tax planning for inherited assets. Key considerations include:
- Step-up in basis at death: Assets included in the estate receive a stepped-up cost basis to their fair market value at the date of death. This eliminates unrealized capital gains for heirs.
- Inherited retirement accounts: The SECURE Act requires most non-spouse beneficiaries to withdraw inherited IRA/401(k) funds within 10 years, potentially at high income tax rates.
- Roth conversions: Converting traditional retirement accounts to Roth accounts during the owner’s lifetime can reduce the income tax burden on heirs.
State Estate Taxes Still Apply
The federal exemption is ~$15 million, but several states impose their own estate or inheritance taxes with much lower exemptions:
| State | Estate Tax Exemption (Approx.) |
|---|---|
| Connecticut | ~$13,610,000 (matches federal as of recent years) |
| Hawaii | ~$5,490,000 |
| Illinois | ~$4,000,000 |
| Maine | ~$6,800,000 |
| Maryland | ~$5,000,000 |
| Massachusetts | ~$2,000,000 |
| Minnesota | ~$3,000,000 |
| New York | ~$7,160,000 |
| Oregon | ~$1,000,000 |
| Rhode Island | ~$1,774,583 |
| Vermont | ~$5,000,000 |
| Washington | ~$2,193,000 |
| District of Columbia | ~$4,710,800 |
An estate that owes no federal estate tax could still owe substantial state estate tax. Estate planning must account for both federal and state rules, particularly in states with low exemptions. Review your state’s specific tax situation using our state tax guides.
Generation-Skipping Transfer (GST) Tax
The generation-skipping transfer tax exemption is also set at ~$15 million per individual for 2026, matching the estate tax exemption. The GST tax applies to transfers (by gift or at death) to grandchildren or more remote descendants, at a flat 40% rate on amounts exceeding the exemption.
The permanent ~$15 million GST exemption allows families to create multi-generational trusts that can shelter very large amounts of wealth from both estate tax and GST tax.
Annual Gift Tax Exclusion
Separate from the lifetime exemption, the annual gift tax exclusion allows you to give up to ~$19,000 per recipient per year (for 2026, adjusted for inflation) without using any of your lifetime exemption. For married couples, this doubles to ~$38,000 per recipient through gift splitting.
Example: A married couple with three children and four grandchildren can give up to ~$38,000 each, totaling ~$266,000 per year, without touching the ~$30 million combined lifetime exemption.
Frequently Asked Questions
Does the permanent exemption mean I never need to worry about estate tax?
For the vast majority of Americans, yes. With a $15 million individual exemption ($30 million for married couples), fewer than ~0.1% of estates will owe federal estate tax. However, if your net worth is approaching the exemption level, or if you live in a state with a lower exemption, estate planning remains important.
My estate is worth ~$5 million. Do I need estate planning?
While you likely do not owe federal estate tax, estate planning encompasses much more than tax minimization. Wills, trusts, beneficiary designations, powers of attorney, and healthcare directives are important regardless of estate size. If you live in a state like Massachusetts (with a ~$2 million exemption) or Oregon (with a ~$1 million exemption), state estate tax planning is relevant even at ~$5 million.
What is the stepped-up basis, and does the OBBB change it?
The stepped-up basis means that when you die, your heirs’ cost basis in inherited assets is “stepped up” to the fair market value at the date of death. This eliminates unrealized capital gains. The OBBB does not change the stepped-up basis rules. This is a significant benefit that remains intact.
Can Congress change the exemption later?
Yes. Congress can always modify tax law. The word “permanent” means there is no built-in sunset, but future legislation could raise, lower, or eliminate the exemption. Financial planning should account for this possibility, though there is currently no pending legislation to reduce it.
How do I file Form 706?
Form 706 (United States Estate (and Generation-Skipping Transfer) Tax Return) must be filed within 9 months of the decedent’s death. Extensions of up to 6 months are available. Even if no tax is owed, filing is recommended to elect portability. The form is complex and typically requires a tax professional or estate attorney. For general IRS filing deadlines, see our filing guide.
Does the estate tax apply to inherited retirement accounts?
Retirement accounts (IRAs, 401(k)s) are included in the gross estate for estate tax purposes. However, they are also subject to income tax when distributions are taken by the heirs. This can create a double-tax situation for very large estates. Roth accounts avoid the income tax component since qualified Roth distributions are tax-free. Learn more about tax planning in our tax deductions guide.
What about the gift tax?
The gift tax and estate tax share a unified ~$15 million lifetime exemption. Gifts above the ~$19,000 annual exclusion count against your lifetime exemption. There is no separate gift tax exemption. See our IRS refund tracker for information on processing timelines for filed returns.
Key Takeaways
- The federal estate tax exemption is now permanently set at
$15 million per individual ($30 million MFJ) - There is no sunset — the exemption does not expire
- The 40% tax rate applies to estate values exceeding the exemption
- Portability allows surviving spouses to use unused exemption (but Form 706 must be filed)
- State estate taxes may still apply at much lower thresholds
- The “use it or lose it” urgency from the TCJA sunset is eliminated
- Estate planning remains important for asset protection, state taxes, and income tax optimization
- For a complete overview of all OBBB changes, see the One Big Beautiful Bill tax changes guide
Tax Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws are subject to change, and individual circumstances vary. Consult a qualified tax professional or estate planning attorney for guidance specific to your situation. Visit IRS.gov for official information on the federal estate tax.