LifePolicyFactsHow the federal estate tax works in 2026
The federal estate tax applies only to the part of an estate above the exemption. For 2026 the exemption is 15,000,000 per person (30,000,000 for a married couple with portability), made permanent by the One Big Beautiful Bill Act. Amounts above it are taxed at up to 40%. Fewer than 1% of estates owe any federal estate tax.
Worked example
A 20,000,000 estate with 500,000 of debts, no charitable bequests and the full 15,000,000 exemption leaves a taxable estate of 4,500,000. At 40%, the estimated federal tax is 1,800,000.
What this leaves out
This is the federal tax only. Twelve states plus Washington DC have their own estate taxes, and six states have inheritance taxes, often starting at much lower amounts — some at 1,000,000. Charitable bequests and debts reduce the taxable estate, and proper planning (trusts, portability, lifetime gifts) can reduce it further. Talk to an estate attorney for anything near the threshold.
Frequently asked questions
What is the estate tax exemption for 2026?
15,000,000 per individual, 30,000,000 for a married couple using portability. It was made permanent by the One Big Beautiful Bill Act, signed July 2025.
What is the top estate tax rate?
40%, applied only to the taxable amount above the exemption — not to the whole estate.
Do most families owe estate tax?
No. With a 15,000,000 exemption, only a small fraction of US estates owe any federal estate tax.
What about state estate taxes?
Twelve states plus DC impose their own estate tax, six more have inheritance taxes, and their exemptions are far lower — some start at 1,000,000. Check your state.
Can life insurance help with estate tax?
It can provide liquidity to pay the tax so heirs do not have to sell assets. Ownership structure matters — policies owned by the deceased can count in the taxable estate.