Estate and Gift Tax in 2026: The $15 Million Exemption Is Now Permanent
For the past several years, estate planning attorneys had one consistent message: use your exemption before 2026, because it's getting cut in half. The TCJA had doubled the federal estate tax exemption from roughly $5.5 million to over $13 million per person — but that increase was temporary, set to revert to approximately $7 million on January 1, 2026.
The One Big Beautiful Bill Act changed the calculus entirely. Not only did the exemption not revert — it was raised to $15 million per person and made permanent.
The New Numbers
| Item | 2025 | 2026 (OBBB) | What Would Have Been (Sunset) |
|---|
| Estate tax exemption | $13,990,000 | $15,000,000 | ~$7,000,000 |
| Lifetime gift tax exemption | $13,990,000 | $15,000,000 | ~$7,000,000 |
| Annual gift exclusion | $19,000/recipient | $19,000/recipient | $19,000/recipient |
| GST tax exemption | $13,990,000 | $15,000,000 | ~$7,000,000 |
| Top estate/gift tax rate | 40% | 40% | 40% |
The estate and gift tax exemptions are unified — meaning the $15 million is a combined lifetime limit. Every dollar you give away during your lifetime as a taxable gift (above the annual exclusion) reduces the amount sheltered at death.
For married couples using portability, the effective exemption is $30 million. That's enough to shelter all but the wealthiest estates from any federal estate tax.
Indexing to Inflation
The $15 million figure is indexed to inflation going forward. The IRS adjusts it annually, so by 2027 it could be approximately $15.3 million, depending on the Consumer Price Index. Unlike the TCJA version, there is no sunset date — this is a permanent change to the tax code.
What Changed for Gift Tax Planning
The annual gift tax exclusion remains at $19,000 per recipient for 2026. This is the amount you can give to any individual in a calendar year without using any of your lifetime exemption or filing a gift tax return. Married couples can combine their exclusions to give $38,000 per recipient.
The more significant change is the lifetime exemption itself. With $15 million per person, many families who were racing to make large gifts before the feared 2026 sunset can now afford to be more deliberate. The urgency to "use it or lose it" has diminished considerably.
That said, there are still compelling reasons to gift during your lifetime rather than at death:
- Appreciation escapes the estate. If you gift $1 million in stock that later grows to $3 million, only $1 million counts against your exemption.
- Income tax shifting. Gifting income-producing assets to family members in lower tax brackets can reduce the family's overall tax burden.
- State estate tax planning. Most state estate taxes don't have a gift tax equivalent, so lifetime gifts can move assets beyond the reach of state-level taxation.
The Generation-Skipping Transfer (GST) Tax
The GST exemption also increased to $15 million, matching the estate tax exemption. The GST tax applies when you transfer assets to grandchildren or more remote descendants (skipping a generation), and the 40% rate can stack on top of estate tax if you exceed the exemption.
With a $15 million GST exemption, dynasty trust strategies — where assets pass through multiple generations without estate tax — become viable for a broader range of families.
Portability: Don't Forget to File
Portability allows a surviving spouse to claim the unused portion of the deceased spouse's estate tax exemption. If the first spouse to die used $3 million of their $15 million exemption, the surviving spouse can add the remaining $12 million to their own $15 million — for a total of $27 million.
But portability isn't automatic. The executor must file Form 706 (the federal estate tax return) within 9 months of death (with a 6-month extension available), even if no estate tax is owed. Failing to file means the unused exemption is lost forever.
This is one of the most common and costly estate planning mistakes. If your spouse passes away and their estate is well below $15 million, you still need to file Form 706 to preserve portability. The IRS has a late-filing procedure, but it's far better to handle it on time.
State Estate Taxes: The Other Side of the Story
Here's where the celebration gets complicated. The federal exemption may be $15 million, but 12 states and the District of Columbia impose their own estate taxes with much lower thresholds:
| State | Exemption Amount | Top Rate |
|---|
| Connecticut | $15,000,000 | 12% |
| District of Columbia | $4,988,400 | 16% |
| Hawaii | $5,490,000 | 20% |
| Illinois | $4,000,000 | 16% |
| Maine | $7,160,000 | 12% |
| Maryland | $5,000,000 | 16% |
| Massachusetts | $2,000,000 | 16% |
| Minnesota | $3,000,000 | 16% |
| New York | $7,350,000 | 16% |
| Oregon | $1,000,000 | 16% |
| Rhode Island | $1,838,056 | 16% |
| Vermont | $5,000,000 | 16% |
| Washington | $3,000,000 | 20% † |
2026 values; several states index annually. Connecticut ties its exemption to the federal basic
exclusion amount, so it moves with the $15 million federal figure.
† Washington changed twice inside 2026. SB 5813 (2025) raised the exclusion from $2,193,000 —
frozen since 2018 — to $3,000,000 and lifted the top rate to 35%. An inflation adjustment set
$3,076,000 for deaths between 1 January and 30 June 2026; for deaths on or after 1 July 2026 the
exclusion resets to $3,000,000 and the top rate returns to 20%. The row above reflects the rules
in force now.
The New York Cliff
New York's estate tax deserves special attention because of its notorious "cliff" provision. If your taxable estate exceeds 105% of the exemption ($7,350,000 × 1.05 = ~$7,717,500), the exemption disappears entirely and the full estate is taxed — not just the excess.
An estate of $7.3 million owes zero New York estate tax. An estate of $7.8 million could owe roughly $600,000. That $500,000 difference in estate value creates a $600,000 tax liability. It's one of the most punitive provisions in any state tax code and creates enormous planning pressure for New Yorkers with estates in the $6–8 million range.
Key Planning Strategies for 2026
With the federal exemption at $15 million permanent, the planning focus shifts in several ways:
For estates under $15 million ($30 million for couples): Federal estate tax is no longer a concern. Focus shifts to state-level estate tax planning — particularly in states like Massachusetts ($2M exemption), Oregon ($1M), and Washington ($2.2M).
For estates above $15 million: The 40% federal rate still applies to amounts over the exemption. Irrevocable life insurance trusts (ILITs), grantor retained annuity trusts (GRATs), and charitable remainder trusts (CRTs) remain important tools.
For everyone: Review existing estate plans drafted when the exemption was lower or expected to sunset. Trusts created to shelter $7 million may be unnecessarily complex now that the exemption is $15 million. Simplification may be possible — and desirable.
The permanence of the $15 million exemption is a genuine shift. But permanence in tax law is only as durable as the next Congress. Plan for the law as it exists today while maintaining flexibility.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.