Federal Estate Tax Exemption 2026 ($15M)

2026 Federal Estate Tax Exemption

The federal estate and gift tax exemption for 2025 is $13.99 million per person ($27.98 million for married couples using portability). This amount is adjusted annually for inflation. The OBBBA permanently extended this higher exemption, preventing the scheduled reversion to approximately $7 million per person that would have occurred at the end of 2025. For 2026, the exemption will be slightly higher due to inflation adjustments — the IRS will announce the exact amount in late 2025.

History of the Exemption

Portability Between Spouses

Portability allows a surviving spouse to use the deceased spouse's unused exemption (the Deceased Spousal Unused Exclusion, or DSUE). To claim portability, the executor of the deceased spouse's estate must file Form 706 within 9 months of death (with a 6-month extension available), even if no estate tax is owed. KDA recommends filing Form 706 to elect portability for all married clients — the cost of filing is minimal compared to the potential estate tax savings.

Unified Gift and Estate Tax Exemption

The estate tax exemption and the lifetime gift tax exemption are unified — they share the same $13.99 million amount. Taxable gifts made during your lifetime reduce the amount of exemption available at death. The annual gift tax exclusion ($18,000 per recipient per year) does not count against the lifetime exemption. KDA tracks lifetime taxable gifts for clients who make large gifts to ensure they understand the impact on their remaining estate tax exemption.

Planning Around the Exemption

With the permanent $13.99 million exemption, most families do not need to worry about federal estate tax. However, planning is still important for: (1) Families with estates approaching the exemption amount — the exemption will grow with inflation, but so will the estate. (2) Business owners whose business value may grow significantly. (3) Families with life insurance — large policies can push an estate over the exemption. (4) Families in states with lower state estate tax exemptions (California has no state estate tax, but property in other states may be subject to those states' taxes).