The $15 Million Estate Tax Exemption Stops at the State Line

The first $15,000,000 of an estate passes free of federal estate tax for a death in 2026, and the figure is permanent: §70106 of the One Big Beautiful Bill Act struck the sunset that would have cut it roughly in half this year. What §70106 left alone is the layer beneath. Twelve states and the District of Columbia levy estate taxes of their own, at thresholds as low as $1,000,000, and a $10,000,000 estate that owes the IRS nothing owes Washington State $1,100,000.

Permanent at $15 million

Until July 2025, 26 U.S.C. §2010 carried two numbers. The permanent basic exclusion amount, the figure most people call the estate tax exemption, was $5,000,000, indexed from a 2010 base. The Tax Cuts and Jobs Act had doubled that to $10,000,000 for deaths in 2018 through 2025 only, which produced an indexed $13,990,000 for 2025 and a scheduled drop to roughly half that level for deaths in 2026.

OBBBA §70106 rewrote §2010(c)(3) instead. The basic exclusion amount is a flat $15,000,000 for deaths in calendar year 2026, and the temporary-doubling paragraph was struck from the statute; Rev. Proc. 2025-32 §2.14 records the mechanics. Two figures move with it. The generation-skipping transfer exemption under §2631(c) equals the basic exclusion, so it is also $15,000,000 for 2026. And the rate above the exclusion is untouched: the §2001(c) schedule tops out at 40% on taxable amounts over $1,000,000, where every dollar past an exclusion this size lands.

One exclusion for gifts and estates

The $15,000,000 is unified. The same credit that shelters an estate at death under §2010(c)(1) offsets gift tax during life under §2505(a)(1), so every taxable lifetime gift spends exclusion the estate no longer has. The annual exclusion sits outside that math: for calendar year 2026, a donor may give any person $19,000 with no effect on the lifetime figure. It is per donor and per recipient, so two parents can give $19,000 each to each child, every year. Gifts to a spouse who is not a US citizen carry a separate annual figure, $194,000 for 2026, in place of the unlimited marital deduction (Rev. Proc. 2025-32 §4.42).

Portability takes a filing

A married couple can shelter $30,000,000 against deaths in 2026, but the second half takes paperwork. Under §2010(c)(2), a surviving spouse adds the deceased spouse's unused exclusion to their own. Under §2010(c)(5), that works only if the first estate's executor computes the unused amount on Form 706 and elects portability on a timely filed return; once made, the election is irrevocable. The trap is that an estate below the $15,000,000 filing threshold owes no return at all, and skipping the optional one forfeits the unused exclusion for good.

The state patchwork under the federal umbrella

No state legislature matched the federal increase, and only one state's number moved with it. For deaths in 2026, twelve states and the District of Columbia impose their own estate taxes:

Linked amounts are each state's own published 2026 figure, checked against that revenue agency on September 1, 2026; membership and top rates follow the Tax Foundation's survey. Three mechanisms drive the table:

• Connecticut ties its exemption to the federal basic exclusion, so §70106 carried it to $15,000,000 with no vote in Hartford. It is the only state where the federal change crossed the state line.
• Indexing. Maine, New York, Rhode Island, and the District adjust their thresholds annually. The other seven (Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Oregon, Vermont) carry the same amount in 2026 as in the 2025 survey; Oregon's $1,000,000 has sat still while the federal exclusion grew to fifteen times its size.
• Washington changed twice in twelve months. SB 5813 (2025) raised the exclusion and pushed the top rate to 35%, then SB 6347, Chapter 209, Laws of 2026, rolled the rate schedule back. A death from January 1 through June 30, 2026 got a $3,076,000 exclusion under the 35% schedule; a death on or after July 1, 2026 gets $3,000,000 under the restored 20% top rate. The table shows the rules in force now.

Five more states tax the transfer from the other end. An inheritance tax is owed by the heir, at rates set by the heir's relationship to the decedent, and Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania levy one for 2026, at top rates from 10% to 16%. Maryland levies both taxes. Iowa's inheritance tax ended for deaths on or after January 1, 2025. None of the five keys off the federal exclusion.

The same $10,000,000, three ways

Take a $10,000,000 taxable estate, no deductions, death in September 2026.

Federal: $0. The estate sits $5,000,000 under the basic exclusion, and below the $15,000,000 threshold no federal return is required, though the executor of a married decedent may want to file one anyway for portability.

Washington: $1,100,000. Washington subtracts its exclusion first and taxes the remainder. $10,000,000 minus $3,000,000 leaves a Washington taxable estate of $7,000,000, and Table W in RCW 83.100.040 prices it in slices: 10% of the first $1,000,000 is $100,000; the 14%, 15%, and 16% brackets on the next three million add $140,000, $150,000, and $160,000; 18% on the following two million adds $360,000; 19% on the last million adds $190,000. The statute's own row for a $7,000,000 taxable estate states the same total in one cell: $1,100,000, an effective 11% of the full estate.

New York: $1,067,600. New York never subtracts. Its $7,350,000 exclusion works as a credit, and Tax Law §952 phases that credit out above the exclusion, then cancels it once the taxable estate exceeds 105% of it, which for a 2026 death means $7,717,500. A $10,000,000 estate is past that cliff, so the whole amount runs through the rate table from dollar one: $930,800 on the first $9,100,000, plus 15.2% of the remaining $900,000, is $1,067,600. The cliff, and what it does to estates between $7 million and $8 million, has its own article.

Side by side: Washington reaches this estate with a $3,000,000 exclusion and 10–20% rates; New York reaches it with a $7,350,000 exclusion the cliff takes away and 3.06–16% rates. The bills land $32,400 apart. One more New York rule belongs in any lifetime-gift plan: the state adds back taxable gifts made within three years of death, so giving on the way out does not clear its tax.

Between a state's threshold and $15,000,000, estate tax in 2026 is a question of address. Above $15,000,000, §2001(c)'s 40% applies to the excess. The exclusion itself moves next for deaths in 2027: §2010(c)(3)(B) restarts annual indexing from a 2025 base year, rounded to the nearest $10,000, and the first adjusted figure will be published in the successor to Rev. Proc. 2025-32 this fall.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.