Estate Tax Explained: Will Your Estate Owe Anything?

Most families never see a federal estate tax bill, because the law lets you give away or pass down a large amount of property tax-free. Technically, the estate tax and the gift tax are one combined system, often called the "unified gift and estate tax." It adds up everything you gave away while alive and everything you left behind at death, then measures that total against the exemption. For deaths in 2026, you can pass on up to $15 million ($30 million for a married couple) before any federal tax applies. The tax isn't calculated until death unless you happen to give away more than $15 million in taxable gifts during your lifetime, which is rare.

If your estate is worth less than the current exemption of $15 million in 2026 — true for more than 99.9% of people — it won't owe federal estate tax when you die.

In July 2025, lawmakers raised the federal estate tax exemption to $15 million ($30 million for married couples), effective January 2026. This higher exemption is described as "permanent," meaning it isn't set to expire or drop back down, aside from routine annual adjustments for inflation. That said, a future Congress and president could still pass new legislation that changes or eliminates it. You can also read a related overview of how this exemption works.

The personal exemption amount

The personal exemption lets a fixed dollar amount pass to anyone, tax-free, regardless of who inherits it. As mentioned, that amount is $15 million for deaths in 2026, and it will rise each year afterward to keep pace with inflation.

If your estate falls under this exemption — which covers the vast majority of estates — no federal estate tax is owed at death. If you made taxable gifts during your life, though, those amounts get subtracted from your remaining exemption. Not every gift counts as taxable, and using nontaxable gifts strategically can actually lower your overall estate tax exposure.

Example: Dave dies in 2026 with an estate worth $12 million. During his life, he also gave away $6 million in taxable gifts. Combined, his estate and gifts total $18 million — $3 million over the $15 million exemption. His estate owes tax only on that $3 million overage, not on the full $18 million.

The marital deduction

Property left to a surviving spouse passes free of estate tax under what's known as the marital deduction. This deduction doesn't apply if the surviving spouse isn't a U.S. citizen, though the personal exemption can still be used to shield property left to a noncitizen spouse. (I.R.C. § 2056 (2026).)

The charitable deduction

Property left to a qualifying tax-exempt charity also avoids estate tax entirely. (I.R.C. § 2056(a) (2026).)

Special rules for married couples

Surviving spouses get an added advantage. If the first spouse to die didn't use their full exemption, the survivor can claim what's left over. Together, that gives a couple an exemption worth double the individual amount, split however produces the best tax outcome. Say a man dies and leaves $10 million to his wife — no tax is owed, since spousal transfers are tax-free. When she later dies and leaves $20 million (her own $10 million plus the $10 million she inherited) to their children, her estate still owes no estate tax. Even though $20 million is above her individual exemption, she can apply the unused portion of her husband's exemption to cover the difference.

State estate and inheritance taxes

Clearing the federal threshold doesn't guarantee a clean exit — some states impose their own estate or inheritance taxes on top. See the Estate and Gift Tax FAQ for details. If you live in one of these states, there's little you can do to sidestep the tax short of relocating.

It's worth checking your own state's specific estate and inheritance tax rules, since they vary widely and change over time.

Getting help and more information

If you expect your estate to land above the federal exemption, talk with an experienced estate planning attorney who can walk you through your options. Several planning tools exist to reduce or eliminate estate tax liability — AB trusts (sometimes called bypass trusts) are one common example. A knowledgeable attorney can also point you toward broader estate planning guides and, separately, resources on settling an estate or trust after someone has died. Keep in mind that the exact rules that apply to your situation depend on your state and your particular circumstances, so it's worth getting advice tailored to you rather than relying on general information alone.