Wealthy PotEstate Tax: Who Actually Pays It
The federal estate tax applies to estates worth more than $15 million in 2026, and the top rate is 40% on the amount above that. Almost nobody pays it. In the most recent year of IRS data, 2,663 estates in the entire country owed any federal estate tax, against roughly 3.07 million deaths. This page gives the exemption, the real rate schedule, the filing rule that catches married couples out, and the states whose own thresholds start far lower than the federal one.
Table of Contents
The Short Answer
- The 2026 federal estate tax exemption is $15,000,000 per person, up from $13,990,000 in 2025.
- Rates run from 18% to 40%, and the 40% applies only to the taxable amount above the exemption, never to the whole estate.
- 2,663 estates owed federal estate tax in the latest IRS data, roughly one death in 1,150.
- A married couple can shelter $30 million, but only if the first estate files a return to claim it. Many do not.
- There is no federal inheritance tax. The estate pays, not the heir.
- Several states tax estates from as little as $2 million, so the state rules bite long before the federal ones do.
Who Actually Pays It
The estate tax generates more anxiety than revenue. The IRS Statistics of Income division publishes exactly how many estates file and how many owe, and the numbers are small enough to be worth stating plainly.
| Estate tax returns filed in 2024 | Number | Gross estate |
|---|---|---|
| All returns filed | 7,195 | $248.9 billion |
| Returns that owed tax | 2,663 | $128.8 billion |
| Returns that owed nothing | 4,532 | $120.2 billion |
Total net estate tax on those returns was $23.3 billion. Three things follow.
- Almost no one pays. Against roughly 3.07 million US deaths in 2024, 2,663 taxable estates is about 0.087%, or one death in 1,150.
- Most filers owe nothing. 63% of the returns filed produced no tax, because deductions, mainly the unlimited marital deduction and charitable bequests, brought the taxable estate below the exemption, or because the return was filed only to preserve a spouse's exemption.
- Those who do pay, pay a lot. $23.3 billion across 2,663 estates averages $8.75 million each.
The effective rate is also lower than the headline suggests. $23.3 billion of tax on $248.9 billion of gross estate is 9.4% across all returns filed, not 40%.
The 2026 Exemption
For deaths in 2026 the basic exclusion amount is $15,000,000. An estate below that owes no federal estate tax. The exemption works as a credit rather than a deduction, and the IRS states the matching figure as a basic credit amount of $5,945,800.
| Year of death | Basic exclusion amount |
|---|---|
| 2017 | $5,490,000 |
| 2018 | $11,180,000 |
| 2022 | $12,060,000 |
| 2023 | $12,920,000 |
| 2024 | $13,610,000 |
| 2025 | $13,990,000 |
| 2026 | $15,000,000 |
The 2026 figure is legislation, not inflation. The 2017 tax law roughly doubled the exemption from 2018, and that doubling was written to expire at the end of 2025, which would have cut the exemption roughly in half for 2026. Section 70106 of the One Big Beautiful Bill (P.L. 119-21) set the basic exclusion amount at $15,000,000 for 2026 instead, and inflation adjustments resume from 2027. If you read older planning advice warning about a 2026 sunset, that sunset did not happen.
The generation-skipping transfer tax exemption, which applies to gifts and bequests to grandchildren and others two or more generations down, is the same $15,000,000 for 2026.
The Estate Tax Rates
The estate and gift taxes share one rate schedule. It is graduated, and the rate applies to the taxable transfer, which is what remains after the exemption, not to the value of the estate.
| Taxable amount over | Not over | Tax on the amount in column 1 | Rate on the excess |
|---|---|---|---|
| $0 | $10,000 | $0 | 18% |
| $100,000 | $150,000 | $23,800 | 30% |
| $250,000 | $500,000 | $70,800 | 34% |
| $500,000 | $750,000 | $155,800 | 37% |
| $750,000 | $1,000,000 | $248,300 | 39% |
| $1,000,000 | and above | $345,800 | 40% |
In practice the graduated bottom of the table is almost never reached, because the exemption is $15 million. An estate large enough to be taxable has already used up the lower brackets, so the marginal rate on the first dollar above the exemption is 40%.
A worked example, hypothetical. An estate of $17 million in 2026, with no deductions and no lifetime gifts, has a taxable amount of $2 million after the $15 million exemption. The tax is $345,800 plus 40% of the $1 million above $1 million, which is $745,800. That is 4.4% of the $17 million estate, not 40%.
Portability: The $30 Million Rule Couples Miss
A surviving spouse can add the unused portion of the first spouse's exemption to their own, which lets a married couple shelter $30 million in 2026. This is called portability, and the unused amount is the deceased spousal unused exclusion, or DSUE.
It is not automatic. The IRS is explicit that a Form 706 must be filed to elect it, and that this is true regardless of the size of the estate. A widow whose husband died with $1 million in assets, far below any threshold, still needs an estate tax return filed for him if she wants his unused exemption available later. No return, no DSUE.
Two practical points:
- The election is made on a timely filed return, which means within nine months of death, or fifteen months with the automatic extension. Late relief exists for estates not otherwise required to file, but relying on it is a worse position than filing on time.
- Assets left to a surviving spouse are covered by the unlimited marital deduction and pass free of estate tax at the first death anyway. Portability is about preserving the exemption for the second death, which is when the tax usually lands.
This is the single most common avoidable estate tax mistake, and it is administrative rather than financial. The documents that surround it are covered in our guide to estate planning basics.
How Lifetime Gifts Fit In
The estate tax and the gift tax are a single system, which is why they share one rate table. You cannot avoid the estate tax simply by giving everything away before death, because large lifetime gifts consume the same exemption.
- The annual exclusion is $19,000 per recipient in 2026, unchanged from 2025. You can give $19,000 to any number of people each year with no gift tax, no return, and no effect on your exemption. A married couple can give $38,000 to each recipient.
- Above $19,000 to one person, Form 709 is required. Filing does not usually mean paying. The excess is applied against your $15 million lifetime exemption, and tax is due only once that is exhausted.
- Gifts to a spouse who is not a US citizen have their own larger annual exception, $194,000 in 2026.
- Paying someone's tuition or medical bills directly to the institution does not count as a gift at all, and sits outside the annual exclusion entirely.
State Estate and Inheritance Taxes
This is where most people who face a death tax actually meet one. A number of states levy their own estate tax, and a handful levy an inheritance tax on the recipient. State thresholds are far below the federal $15 million, and state law changes often.
The figures below were checked directly with each state's own revenue department. We publish only the states we verified; several others also levy one of these taxes, so check your own state's revenue department rather than assuming.
| State | 2026 estate tax threshold |
|---|---|
| Massachusetts | $2,000,000 gross estate, with a $99,600 credit against the tax |
| Washington | $3,076,000 for deaths to 30 June 2026, then $3,000,000 from 1 July 2026 |
| Vermont | $5,000,000, raised by the 2026 legislature effective 18 June 2026 |
| New York | $7,350,000 for deaths during 2026 |
Two details in that table are easy to misread. Washington's threshold falls in the middle of 2026, and the Department of Revenue says it is "not set to increase going forward due to an expired CPI in the statute". New York's exemption is a cliff rather than a simple allowance: once an estate rises far enough above the basic exclusion amount, the benefit disappears rather than tapering.
Inheritance taxes are a different animal. They are paid by the person receiving, and the rate depends on how closely related you were to the deceased.
- Pennsylvania: 0% to a surviving spouse; 4.5% to children, grandchildren and other lineal heirs; 12% to siblings; 15% to everyone else, with charities and government entities exempt.
- Kentucky: Class A beneficiaries, which include spouses, children and parents, are exempt. Class B, including nieces, nephews and children-in-law, get a $1,000 exemption and pay 4% to 16%. Class C, everyone else, get $500 and pay 6% to 16%.
- New Jersey has an inheritance tax but abolished its estate tax for deaths from 1 January 2018.
The pattern is worth noticing: an inheritance tax usually exempts the closest family entirely and falls hardest on friends and distant relatives. If you are leaving money to someone outside your immediate family in one of these states, that is where the planning effort belongs.
What Heirs Pay
If you have inherited money and are worried about a tax bill, the answer is usually reassuring. There is no federal inheritance tax. The estate settles any federal estate tax before anything is distributed, so what reaches you has already been through it. Only the six or so states with an inheritance tax reach the recipient directly.
Two rules matter more to heirs than the estate tax does.
Inherited assets get a new cost basis. Under IRS rules the basis of inherited property is generally its fair market value on the date of death, or on the alternate valuation date if the estate elects it. If your mother bought shares for $20,000 and they were worth $200,000 when she died, your basis is $200,000. Sell immediately and the taxable gain is close to zero. The $180,000 of appreciation during her lifetime is never taxed as income to anyone. This matters far more to ordinary families than the estate tax does, and it interacts with the rules in our guide to capital gains tax.
Inherited retirement accounts are the exception. A traditional IRA or 401(k) does not get a step-up, and withdrawals are taxed as ordinary income to the beneficiary at their own tax bracket. An inherited IRA is a deferred tax bill, not a windfall, and the distribution rules are their own subject.
Filing Form 706
The federal estate tax return is Form 706. The IRS requires it from the executor of the estate of a US citizen or resident in two situations:
- The gross estate, plus adjusted taxable gifts and specific exemption, is more than $15,000,000 for a 2026 death; or
- The executor elects to transfer the DSUE amount to a surviving spouse, regardless of the size of the estate.
The return and any tax are due nine months after the date of death. Form 4768 gets an automatic six-month extension of time to file, though an extension to file is not an extension to pay.
Note that the threshold is measured on the gross estate, before deductions. An estate of $16 million that leaves everything to a surviving spouse owes no tax, thanks to the unlimited marital deduction, but still has to file. That is a large part of why 63% of the returns in the IRS data produced no tax.
Sources & Methodology
Every figure here was read from the primary source named, not from a secondary summary.
- IRS Instructions for Form 706 (Rev. July 2026): the 2026 basic exclusion amount and credit, the Table A unified rate schedule, the filing requirements and the nine-month deadline.
- IRS Statistics of Income, Estate Tax Returns Study, Table 1 (July 2026): returns filed in 2024 by tax status, and the net estate tax figure.
- IRS Rev. Proc. 2025-32: the $15,000,000 exclusion and GST exemption for 2026 and the $19,000 annual gift exclusion.
- IRS Publication 551, Basis of Assets: the rule that inherited property takes its date-of-death fair market value as basis.
- Public Law 119-21: section 70106, which set the 2026 exclusion at $15,000,000 rather than letting it revert.
- CDC National Center for Health Statistics: 3,072,666 US deaths in 2024, used as the denominator for the share of estates taxed.
- State figures from the Massachusetts Department of Revenue, Washington Department of Revenue, Vermont Department of Taxes, New York State Department of Taxation and Finance, Pennsylvania Department of Revenue, Kentucky Department of Revenue and New Jersey Division of Taxation.
- The share of deaths taxed, the average tax per taxable estate and the effective rate are our own arithmetic on the IRS and CDC figures above.
This article is for general education only and is not tax or legal advice. Estate tax is highly individual and interacts with state law, trusts and business interests. Consult a qualified estate attorney or tax professional before acting on any of these figures.
FAQ: Estate Tax
What is the federal estate tax exemption for 2026?
$15,000,000 per person, per the IRS. An estate below that owes no federal estate tax. A married couple can shelter $30,000,000 between them if the first estate files a return to preserve the unused portion.
What is the estate tax rate?
The schedule runs from 18% to 40%, and 40% applies to the taxable amount above $1,000,000. Because the exemption is $15 million, any estate that owes tax at all is effectively paying 40% on the excess over the exemption. Across all returns actually filed, the effective rate was 9.4%.
How many people actually pay estate tax?
2,663 estates owed federal estate tax in the most recent IRS data, against roughly 3.07 million deaths a year. That is about one death in 1,150, or 0.087%.
Is there a federal inheritance tax?
No. The federal government taxes the estate, not the recipient. A few states, including Pennsylvania, Kentucky and New Jersey, do levy an inheritance tax on the person receiving, with the rate depending on the relationship.
How much can you inherit without paying taxes?
At the federal level there is no limit on what you can receive tax free, because the tax falls on the estate rather than on you, and only above $15 million. Inherited assets also generally take a new cost basis equal to their value at the date of death. Inherited traditional retirement accounts are the main exception, and are taxed as income when you withdraw.
Did the estate tax exemption drop in 2026?
No. It was scheduled to roughly halve when the 2017 doubling expired at the end of 2025, but Public Law 119-21 set it at $15,000,000 for 2026, with inflation adjustments resuming in 2027. Planning advice written before July 2025 may still warn about a sunset that did not occur.
Do I have to file an estate tax return?
Form 706 is required if the gross estate plus adjusted taxable gifts exceeds $15,000,000 for a 2026 death, or if you are electing to transfer a deceased spouse's unused exemption, which applies no matter how small the estate is. It is due nine months after death, with a six-month extension available.
How much can I give away each year without tax?
$19,000 per recipient in 2026, unchanged from 2025, to as many people as you like. Above that you must file Form 709, though tax is due only once your $15 million lifetime exemption is used up. Tuition and medical bills paid directly to the institution do not count as gifts at all.
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“Estate Tax: Who Actually Pays It.” Wealthy Pot, 2026. https://wealthypot.com/estate-tax/
