Unified Tax Credit: 2026 Estate and Gift Tax Exclusion and Rate

The unified tax credit is the federal mechanism that lets you transfer up to $15 million in 2026 through a combination of lifetime gifts and property left at death without owing any federal gift or estate tax. A married couple can shield up to $30 million combined.¹ It’s called “unified” because gifts and bequests share one running total: every dollar you shelter with a tax-free gift during life is one less dollar available to shelter your estate at death.

The $15 million figure is technically called the Basic Exclusion Amount, or BEA. The “credit” itself is the tax equivalent of that amount, meaning it cancels out exactly the tax that would otherwise be owed on the first $15 million transferred. You don’t subtract $15 million from a tax bill; the credit erases the tax on the first $15 million of transfers, and anything above that is taxed.

The 2026 Exclusion and the 40% Rate

For anyone who dies in 2026, the BEA is $15,000,000.² Anything above it is taxed at a flat 40%. The statute technically contains a progressive bracket schedule starting at 18%, but the credit absorbs all the tax owed on amounts up to $15 million, so in practice the first dollar over the exclusion is taxed at 40% and every dollar after that is taxed the same.

The exclusion is now permanent. The Tax Cuts and Jobs Act had roughly doubled the exclusion in 2018, but the increase was scheduled to sunset at the end of 2025 and drop the BEA back to about $7 million.³ The One, Big, Beautiful Bill Act, signed July 4, 2025, eliminated the sunset and reset the statutory BEA to $15 million for 2026, with automatic inflation adjustments after that.² If you made large gifts between 2018 and 2025 to beat the expected drop, IRS anti-clawback regulations finalized in 2019 protect them: an estate can calculate its credit using the higher of the BEA at the time of the gift or the BEA at death.

How Lifetime Gifts Draw Down the Credit

Not every gift eats into your $15 million. The annual gift tax exclusion for 2026 is $19,000 per recipient. You can give that amount to as many different people as you want each year, no filing required and no impact on your lifetime credit. Gifts to a noncitizen spouse have a separate, higher annual exclusion of $194,000 for 2026.⁴ Gifts to a U.S. citizen spouse are unlimited.

Give more than $19,000 to a single person in a year and the overage is a “taxable gift.” You won’t actually owe any tax on it until you’ve used up the full $15 million, but you do have to file IRS Form 709 to report it.⁵ A $100,000 gift to one person, for example, uses $81,000 of your BEA: the amount over the annual exclusion. That total carries forward on every subsequent Form 709 and eventually shows up on your estate tax return.

Filing Form 709 matters even when you owe no tax. Without a filed return that adequately describes the gift, the IRS can challenge its value indefinitely. Once you file with proper disclosure, the statute of limitations starts running and the IRS generally has three years to dispute the valuation.⁶ Skipping the paperwork is one of the more common estate planning mistakes, and it can leave heirs sorting out valuations decades later.

Married couples can also elect to split gifts, treating any gift by either spouse as if each gave half. That doubles the annual exclusion to $38,000 per recipient and, on larger gifts, draws equally from both spouses’ lifetime credits. The election covers all gifts made during the year, requires the consenting spouse to sign a Notice of Consent on the donor’s Form 709, and makes both spouses jointly liable for any tax.⁵

How the Credit Applies at Death

Whatever’s left of the $15 million after lifetime gifts shelters the estate. The estate tax calculation starts with the gross estate, which reaches further than most people expect.

What Counts in the Gross Estate

Federal regulations pull the following into the gross estate at fair market value:⁷

Property the decedent owned outright: real estate, investments, business interests, personal property.
Lifetime transfers where the decedent kept income rights, control over who benefits, or the power to revoke. This is why revocable living trusts don’t remove assets from the estate.
The decedent’s share of jointly held property.
Life insurance proceeds on the decedent’s life, if the decedent owned the policy or had “incidents of ownership” such as the right to change beneficiaries.
Retirement accounts payable to beneficiaries.
Property over which the decedent held a general power of appointment.

Life insurance is the surprise. A $2 million term policy you owned and forgot about gets added to the gross estate at its full death benefit, which for estates near the threshold can shift the tax bill by hundreds of thousands of dollars.

Deductions Before the Credit Applies

The gross estate is reduced by debts, funeral expenses, and administration costs. Two deductions can eliminate entire categories of assets from the calculation. The marital deduction allows an unlimited amount of property to pass to a surviving U.S. citizen spouse free of estate tax.⁸ A $50 million estate left entirely to a surviving spouse owes no federal estate tax, though the tax is deferred, not erased: whatever the survivor still holds enters their own estate at death. The charitable deduction works the same way for property left to qualifying charities.

After deductions, lifetime taxable gifts are added back to figure the tentative tax, and the unified credit is applied against it.⁹ If the credit covers the tentative tax, the estate owes nothing.

When Form 706 Has to Be Filed

The executor must file Form 706 if the gross estate plus adjusted taxable gifts exceeds $15,000,000 for decedents dying in 2026.⁹ A filing is also required, regardless of size, if the estate wants to elect portability. The return is due nine months after death, with an automatic six-month extension available on Form 4768.¹⁰

Portability: How a Surviving Spouse Inherits Unused Credit

Portability lets the surviving spouse pick up whatever the first spouse to die didn’t use. This “deceased spousal unused exclusion,” or DSUE, adds to the survivor’s own $15 million. If the first spouse used only $5 million during life, the remaining $10 million passes to the survivor, giving them a combined $25 million.¹

Portability is not automatic. The executor of the first estate must file Form 706 and elect it, even when the estate is well below the filing threshold and would otherwise have no reason to file.¹⁰ Missing the election can forfeit millions in future shelter. Estates not otherwise required to file can use a simplified late-election procedure under Revenue Procedure 2022-32, filing up to the fifth anniversary of the decedent’s death with a notation across the top of the return that it is filed under Rev. Proc. 2022-32 to elect portability.¹¹ Estates that actually were required to file cannot use this shortcut and must request a private letter ruling.

Two limitations catch people out. The DSUE comes only from your most recent deceased spouse: if a survivor remarries and the second spouse also dies, the first spouse’s unused amount is lost unless the survivor already spent it on lifetime gifts. And portability applies only to the estate and gift tax credit. The separate generation-skipping transfer tax exemption, also $15 million for 2026, is not portable.¹ Families planning gifts for grandchildren or later generations need to allocate the GST exemption during each spouse’s lifetime.

State Taxes Are Separate

The unified credit only shields you from federal transfer taxes. Roughly a dozen states and the District of Columbia impose their own estate taxes, some with exclusion thresholds well below the federal $15 million. An estate of $5 million can owe nothing to the IRS and still face a six-figure state bill. A handful of states impose inheritance taxes, paid by the beneficiary rather than the estate, with the rate depending on the beneficiary’s relationship to the decedent. Spouses are typically exempt, close relatives face lower rates, and unrelated beneficiaries can be taxed at rates reaching 16%. One state levies both. If you have assets in a state that imposes its own transfer tax, the federal credit is only part of the picture.

1
Internal Revenue Service. What’s New — Estate and Gift Tax
2
Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax
3
Internal Revenue Service. Estate and Gift Tax FAQs
4
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
5
Internal Revenue Service. Instructions for Form 709 (2025)
6
Internal Revenue Service. TD 8845 – Adequate Disclosure of Gifts
7
eCFR. 26 CFR 20.2031-1 – Definition of Gross Estate; Valuation of Property
8
Office of the Law Revision Counsel. 26 USC 2056 – Bequests, Etc., to Surviving Spouse
9
Internal Revenue Service. Estate Tax
10
Internal Revenue Service. Instructions for Form 706 (09/2025)
11
Internal Revenue Service. Revenue Procedure 2022-32