The scheduled halving after 2025 did not happen, and it was repealed rather than deferred. The doubled exclusion enacted in 2017 was written to fall by roughly half for 2026, and years of planning content was built around using it before it disappeared. Section 70106 of the 2025 tax law removed the temporary increase, set a new flat statutory figure, and reset the inflation base year, so section 2010(c)(3) now simply states the basic exclusion amount as a fixed number with indexing beginning for calendar year 2027. Any article urging action before an imminent sunset is describing law that no longer exists.
How the tax is actually computed, which explains several things that look strange. Start with the gross estate, which is broader than the probate estate: it includes life insurance the decedent owned or controlled, retirement accounts, jointly held property, and property in a revocable trust, none of which goes through probate. Subtract debts, funeral and administration expenses, the unlimited marital deduction for property passing to a surviving spouse, and the charitable deduction. The result is the taxable estate. Section 2001(b) then computes a tentative tax on the taxable estate plus the decedent's post-1976 adjusted taxable gifts, subtracts gift tax already payable on those gifts, and the applicable credit is applied against the result. Two consequences follow from that add-back. Lifetime gifting and death-time transfers draw on one allowance rather than two. And only the appreciation after a gift escapes, since the gift is added back at its value when made.
The filing threshold is a separate rule from the exclusion, and this is the most frequently missed mechanic on the page. Section 6018(a)(1) requires a return where the gross estate exceeds the basic exclusion amount in effect for the year of death. Gross, not taxable: an estate with substantial debt or a large marital bequest can owe nothing and still be required to file. And section 6018(a)(3) reduces that threshold by "the amount of the adjusted taxable gifts made by the decedent after December 31, 1976," so a lifetime gifting program lowers the level at which a return becomes mandatory. A separate and much lower threshold of $60,000 applies under section 6018(a)(2) to the US-situated estate of someone who was neither a citizen nor a resident. Section 6075(a) sets the deadline: the return "shall be filed within 9 months after the date of the decedent's death," with a six-month extension available on request.
Portability, and the fix for the election everyone misses. A surviving spouse may add the deceased spousal unused exclusion to their own, which is what allows a married couple to shelter twice the basic exclusion amount without any trust drafting. It is not automatic. Section 2010(c)(5)(A) requires the election on a timely filed estate tax return, and the election is irrevocable; section 2010(c)(4)(A) caps the transferred amount at the basic exclusion amount, and (c)(4)(B)(i) takes it only from the last deceased spouse, so remarriage can displace it. The trap is obvious in hindsight: the estates that most need portability are the ones small enough to assume no return was needed. Revenue Procedure 2022-32 answers it, granting a simplified late election "on or before the fifth anniversary of the decedent's date of death" for estates that were not otherwise required to file under section 6018(a). So a missed election is often fixable for five years, which makes checking it one of the more valuable things a surviving spouse can do.
Three things the estate tax is regularly confused with. It is not probate. Probate is a state court process establishing who has authority to transfer a decedent's property, and it applies to estates of any size; the estate tax is a federal tax question about whether a transfer is taxed, and the two have almost nothing to do with each other. It is not an inheritance tax: an estate tax is levied on the estate, while an inheritance tax is levied on the recipient with the rate typically depending on how closely related they were. And it is not the income tax. Receiving an inheritance is not income, but what you inherited determines what happens next: a pre-tax retirement account carries the original owner's deferred income tax with it, while appreciated property is generally revalued at death so the accumulated gain is never income-taxed.
State death taxes are the more realistic exposure for most families, and they are independent of the federal rules. A minority of states levy their own estate tax, several at thresholds far below the federal one, so an estate comfortably clear of federal tax can owe state tax. A few levy an inheritance tax instead, and the two are not alternatives: at least one state levies both, which is why "some states tax the estate and others tax the recipient instead" is a tidy taxonomy that fails on the hardest case. Nor is close family automatically exempt from an inheritance tax, though rates for children and siblings are generally lower than for unrelated recipients. Thresholds and rates change with legislative sessions, so a state revenue department is the source worth checking rather than a national article.
The generation-skipping transfer tax, in one clause, because it is routinely over-dramatized. It is a separate tax on transfers that skip a generation, and its exemption is tied by section 2631(c) to the same basic exclusion amount, so it reaches as few families as the estate tax does. It also does not catch the commonest case people worry about: under section 2651(e) a grandchild whose own parent has already died moves up a generation, so inheriting in place of a deceased parent is not a skip.
