For more than a decade, families who spent a lifetime paying down a home, working a farm, or building a small business worried that a temporary tax break would expire and expose the estate to a federal tax bill. That expiration date is now gone. For people who die in 2026, the federal estate and gift tax exemption stands at $15 million per person, and federal law now keeps that level in place permanently rather than letting it roll back to roughly half that amount, as had been scheduled for years. For most retirees and the people who stand to inherit from them, the practical effect is that a paid-off house, land, or a family business can now pass to the next generation without triggering federal estate tax at all.
How the Exemption Reached $15 Million and Stayed There
The federal estate and gift tax exemption, formally called the basic exclusion amount, has climbed steadily since 2011, when it stood at $5 million. A 2017 tax law roughly doubled that figure starting in 2018, pushing it to $11.18 million and then higher each year through inflation adjustments, reaching $13.99 million for people who died in 2025. But that 2017 increase was always temporary. Absent further action from Congress, the exemption was set to expire at the end of 2025 and revert to close to half its 2025 level, exposing far more estates, including many family farms and small businesses, to a tax that can run as high as 40% on amounts above the threshold.
The Working Families Tax Cuts Act, signed into law on July 4, 2025 and widely known as the One Big Beautiful Bill, removed that expiration date. The Internal Revenue Service confirmed that the law amended the tax code’s exemption formula to set the basic exclusion amount at $15 million for 2026, and unlike the prior increase, this one carries no built-in sunset. The exemption is now scheduled to keep rising with inflation every year going forward, the same treatment the IRS gave in its 2026 tax-year inflation adjustments released this fall, which folded in the new law’s changes across estate, gift, and several other tax provisions.
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What the $15 Million Threshold Actually Covers
The exemption works as a shield, not a discount. An estate valued below $15 million owes no federal estate tax at all; only the value above that line is taxed, at rates that climb to 40% at the top. The same exemption also covers lifetime gifts, since the estate and gift taxes share what the IRS calls a unified credit. Any gift larger than the annual per-recipient exclusion, which remains $19,000 for 2026, chips away at the same $15 million lifetime amount that would otherwise shelter an estate at death.
Married couples get an even larger cushion through a provision called portability. When one spouse dies, the surviving spouse can inherit any of the deceased spouse’s unused exemption, provided the estate files a timely Form 706 and elects portability, a step that is optional but must be taken even for an estate that owes no tax and would not otherwise be required to file. Used correctly, portability lets a couple shield up to $30 million combined. That combination of a doubled per-person exemption and permanent portability is why estate planners describe the scenario that once worried family farm and small-business owners, needing to sell land, equipment, or company stock just to cover an estate tax bill, as now affecting only a small slice of estates nationwide.
Why the State Estate Tax Question Still Matters
The $15 million figure applies only to the federal estate tax. Roughly a dozen states plus the District of Columbia still impose their own estate tax, and most set their exemption thresholds far below the new federal level, in some cases at $1 million to $2 million or a few million dollars. An heir in one of those states can owe a state estate tax bill on an estate that carries zero federal liability, so the permanence of the $15 million federal threshold does not eliminate the need to check state law where the deceased person lived or owned property.
For families weighing whether to update a will or trust this year, the higher permanent exemption shifts the planning conversation for most households away from the federal estate tax and toward narrower questions: whether a state estate tax applies, whether portability should be elected on a decedent’s return, and how lifetime gifts already made count against the exemption available at death. Those remain real decisions with real deadlines attached to an executor’s paperwork, even for estates that will never come close to owing the federal government anything.
The permanence of the $15 million figure also changes the calculus around lifetime gifting strategies that many advisors recommended while the higher exemption still carried an expiration date. Some families accelerated gifts of farmland, business interests, or investment accounts before 2026 specifically to lock in the larger exemption before a possible reversion. With that reversion now off the table, there is less urgency to give away assets earlier than a family would otherwise choose, since the $15 million shield is no longer a use-it-or-lose-it benefit tied to a calendar deadline. That gives retirees more flexibility to keep control of assets for as long as they need them, rather than transferring wealth to heirs sooner than they otherwise would to beat an expiration date that no longer applies.
This article was produced with the assistance of AI and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
