Updated June 17, 2026
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The federal estate tax applies a top rate of 40% to the portion of a taxable estate that exceeds the applicable exemption, which is $15 million per person in 2026. Tax is computed on the gross estate minus deductions, then reduced by the exemption. Fewer than 1 in 500 estates pay any federal estate tax.
What counts in the gross estate
The gross estate is the fair market value at death of everything the decedent owned or controlled: real estate held individually or jointly, bank and investment accounts, retirement account balances (IRAs, 401(k)s and similar), life insurance proceeds where the decedent owned the policy, business interests, vehicles, personal property, and certain taxable gifts made during life that are added back. All of these are valued at the date of death, not at original cost.
What reduces the taxable estate
- Marital deduction: assets left to a surviving U.S. citizen spouse pass estate-tax free in any amount. The deduction is unlimited and tends to be the single largest reduction for married couples.
- Charitable deduction: assets left to qualifying charities reduce the taxable estate dollar for dollar.
- Debts and mortgages: outstanding debts, including mortgages, are subtracted from the gross estate.
- Funeral and administration expenses: documented expenses are deductible.
The rate schedule
The tax is graduated: the first $10,000 above the exemption is taxed at 18%, rising to 40% at $1 million above the exemption. Estates large enough to owe any federal tax are almost always well into the 40% bracket. The effective rate on the full taxable estate runs somewhat below 40% because of the graduated lower brackets, but 40% is the rate most advisors use for planning purposes.
When the return is due
Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, is due nine months after the date of death. An automatic six-month extension is available for filing, but not for payment; any tax owed is still due at nine months. Estates below the filing threshold do not need to file unless the executor wants to elect portability of the unused exemption.
This article is for educational purposes only and is not tax or legal advice. Rates and figures are current as of the date above and subject to change by Congress. Consult an estate attorney or CPA for your specific situation.
See if your estate owes tax
Enter your estate value, apply the 2026 federal exemption and your state's rules, and get your estimated estate tax in under a minute.