2026 Federal Estate Tax: The US$15 Million Exclusion, Form 706 and a Worked Example

Start with the gross estate, not the amount each beneficiary receives

The federal gross estate can include cash, securities, real estate, retirement accounts, business interests, life-insurance proceeds controlled by the decedent and other property interests valued at death. Form 706 then allows qualifying debts, funeral and administration expenses, charitable transfers and a marital deduction to arrive at the taxable estate.

This is an estate-level tax calculation. A beneficiary does not simply multiply an inheritance by 40%. State rules are separate: some states impose an estate tax on the estate, while others impose an inheritance tax based on the beneficiary's relationship.

The 2026 basic exclusion is US$15 million

For a U.S. citizen or resident dying in 2026, the federal basic exclusion amount is US$15,000,000 under current law. The filing-threshold screen generally compares the gross estate plus adjusted taxable gifts with that amount, although the full Form 706 test includes additional technical items.

Portability can add a deceased spouse's unused exclusion, called DSUE, but it is not automatic. The executor generally must make a timely election on Form 706. Enter DSUE only when the estate has support for that election.

A US$20 million worked example

Assume a US$20 million gross and taxable estate, no adjusted taxable gifts and no DSUE. The unified rate schedule produces tax at a 40% marginal rate above US$1 million. The tentative tax on US$20 million is US$7,945,800, while the applicable credit equal to tax on the US$15 million exclusion is US$5,945,800.

The difference is US$2,000,000. Deductions can reduce taxable estate, while prior taxable gifts use part of the unified system and may increase the amount exposed at death.

Know what this estimate leaves out

Gift-tax reconciliation, generation-skipping transfer tax, QDOT rules for a noncitizen spouse, alternate valuation, special-use valuation and closely held business elections can materially change a return. Nonresident noncitizens also follow a different regime and should not use the US$15 million default.

Use the calculator to test planning scenarios, then have an estate attorney or tax professional review ownership, beneficiary designations, prior gift returns and state exposure.

Common questions