The short answer
Portability lets the executor of the first spouse to die hand the unused part of that spouse's federal estate exemption to the survivor, who adds it to their own. For a death in 2026 the exemption is $15,000,000, so a married couple that files can shelter $30,000,000 before the 40% federal estate tax applies. The catch is procedural: the deceased spousal unused exclusion exists only if Form 706 is filed, and the deadline is nine months after death, six more with an extension, or up to the fifth anniversary under a relief procedure for estates that were below the filing threshold. Portability does nothing for income tax basis; the step-up under section 1014 is a separate rule.
At a glance
| 2026 basic exclusion amount | $15,000,000 per person, indexed for inflation from 2027 |
|---|---|
| Top federal estate tax rate | 40% on the taxable estate above the exclusion |
| What ports | The lesser of the basic exclusion amount or the last deceased spouse's unused exclusion |
| How it is elected | Only on a Form 706 for the first spouse, and the election is irrevocable |
| Deadline | Nine months after death; six more months with a Form 4768 extension |
| Late election for small estates | Up to the fifth anniversary of death under Rev. Proc. 2022-32 |
| 2026 annual gift exclusion | $19,000 per donee; $194,000 to a non-citizen spouse |
| State estate taxes | Maryland and Hawaii have their own portability; most other estate tax states do not |
Portability exists only by election on the first spouse's estate tax return
Section 2010(c)(2) defines the applicable exclusion amount as the basic exclusion amount plus, for a surviving spouse, the deceased spousal unused exclusion amount, usually called the DSUE. Section 2010(c)(4) sets the DSUE at the lesser of the basic exclusion amount or the unused exclusion of the survivor's last deceased spouse. The statute is at 26 USC 2010.
Section 2010(c)(5)(A) is the part that trips families up. The survivor may use the DSUE only if the executor of the first spouse's estate files an estate tax return on which the amount is computed and makes the election on that return, and once made the election is irrevocable. No return, no DSUE, however small the first estate was.
The election also keeps that first return open. Section 2010(c)(5)(B) lets the IRS examine the first spouse's return to determine the DSUE amount even after the normal assessment period in section 6501 has expired, so the valuations placed on rentals and land in that return should be ones you would defend years later.
The 2026 figures: $15,000,000 each, indexed from 2027, and a 40% rate above it
Section 70106 of Public Law 119-21 rewrote section 2010(c)(3) to set the basic exclusion amount at $15,000,000 for calendar year 2026. Rev. Proc. 2025-32, section 2.14, confirms that figure, states that the generation-skipping transfer exemption under section 2631(c) is also $15,000,000 for 2026, and says both will be adjusted for inflation for 2027 and later years. The statute uses calendar year 2025 as the base year for that adjustment and rounds to the nearest $10,000.
The top federal estate tax rate stays at 40%, per the Instructions for Form 706. The same revenue procedure sets the 2026 annual gift exclusion at $19,000 per donee and $194,000 for gifts to a spouse who is not a United States citizen.
One point matters for anyone modelling a long survivorship: the DSUE is fixed at the first spouse's death and is not indexed afterward. The survivor's own basic exclusion keeps rising with inflation; the ported amount does not.
Form 706 is due in nine months, with a six-month extension and a five-year rescue for small estates
The Form 706 instructions state that an executor can elect to transfer the DSUE amount only if the return is filed timely, meaning within nine months of the date of death or, with an extension obtained on Form 4768, before the six-month extension period ends. An estate that owes no tax and is below the filing threshold still has to file to make the election.
For those small estates there is a second chance. Rev. Proc. 2022-32 lets an estate that was not required to file under section 6018(a) make a late portability election by filing a complete Form 706 on or before the fifth anniversary of death, with a statement at the top of the return that it is filed pursuant to Rev. Proc. 2022-32 to elect portability under section 2010(c)(5)(A). The method is not available if a timely return was already filed, and an estate above the filing threshold has to seek relief another way.
A portability-only return is also lighter than a full one. Under Reg. section 20.2010-2(a)(7)(ii), as described in the Form 706 instructions, an estate filing only to elect portability is not required to report the full value of property passing to the spouse or to charity; the executor estimates those values and includes them in the gross estate total. Rentals, land and DST interests still need a defensible date-of-death value, because that value becomes the heir's basis.
A hypothetical $9,000,000 rental portfolio shows what the election is worth
Hypothetical, round numbers. A couple owns rentals worth $9,000,000 jointly and little else. The first spouse dies in 2026 and leaves everything to the survivor. The marital deduction takes the taxable estate to zero, so none of the $15,000,000 basic exclusion is used, and a timely Form 706 ports the whole $15,000,000 to the survivor as DSUE.
The survivor lives another fifteen years, keeps exchanging into larger property and dies with an estate of $22,000,000. With the DSUE, the survivor's applicable exclusion is $15,000,000 of DSUE plus their own basic exclusion, at least $30,000,000 at 2026 figures, and no federal estate tax is due.
Without the election the survivor shelters only their own exclusion. Using the 2026 figure of $15,000,000, the taxable excess is $7,000,000 and the tax at 40% is $2,800,000. That is the cost of a return that was not filed in year one. The survivor's own exclusion will be indexed by then and the arithmetic will differ; run your own numbers with your CPA.
Real estate changes the planning: basis step-up, DSTs, exchanges and state estate taxes
Portability is an estate tax tool, not an income tax one. Under section 1014 property acquired from a decedent takes a basis equal to its fair market value at death, which erases the deferred gain from a chain of 1031 exchanges; swap till you drop planning and exchanging now versus holding for the step-up cover that side. On jointly held rentals only the decedent's half steps up, while community property can step up in full under section 1014(b)(6).
DST interests pass at death like any other real property interest and take the same step-up; DSTs in estate planning and transferring DST interests to heirs and trusts walk through the mechanics. The portability election still has to be made at the first death regardless of how the property is titled.
State estate taxes run on their own exemptions. Washington's exclusion is $3,076,000 for deaths from January 1 to June 30, 2026 and $3,000,000 on or after July 1, 2026; Oregon requires a return once the gross estate reaches $1,000,000; Massachusetts taxes estates over $2,000,000; New York's basic exclusion for 2026 is $7,350,000. Maryland, at $5,000,000, and Hawaii, at $5,490,000, each let a surviving spouse claim the predeceased spouse's unused state exclusion, but only through a timely state return. Elsewhere a credit-shelter trust funded at the first death is the usual way to use both spouses' state exemptions, and the current rule should be confirmed with the state agency before the first return is filed.
Related questions
Do we have to file Form 706 when the first spouse's estate is far below $15,000,000?
Yes, if you want the unused exclusion to survive. Section 2010(c)(5)(A) grants the DSUE only to a survivor whose spouse's executor filed a return and elected on it. Estates below the filing threshold can use Rev. Proc. 2022-32 to file as late as the fifth anniversary of death.
Is the ported exclusion adjusted for inflation after the first death?
No. The DSUE is fixed at the amount the first spouse left unused. Only the survivor's own basic exclusion is indexed, which Rev. Proc. 2025-32 says begins with calendar year 2027.
What happens to the DSUE if the surviving spouse remarries?
The DSUE always comes from the last deceased spouse under section 2010(c)(4). Remarriage alone changes nothing, but if the new spouse later dies first, that spouse's unused amount replaces the earlier one. Because the applicable exclusion amount, DSUE included, also sets the gift tax credit under section 2505, a survivor can use the ported amount for lifetime gifts of real estate before that can happen.
Does electing portability change the income tax basis of the rental property?
No. Basis is set by section 1014 at fair market value on the date of death whether or not a Form 706 is filed. The two rules work together: the step-up removes the income tax on past appreciation and depreciation, and portability removes the estate tax on the next $15,000,000.
Do state estate taxes follow the federal portability election?
Mostly not. Maryland and Hawaii have written portability into their own estate taxes, elected on a timely state return. Washington, Oregon, Massachusetts and New York each tax estates well below the federal figure, and you should confirm with the state agency whether any spousal carryover exists before relying on one.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.
- 26 USC 2010, Unified credit against estate tax
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- IRS, Instructions for Form 706 (July 2026)
- IRS, Rev. Proc. 2022-32 (late portability election)
- 26 USC 1014, Basis of property acquired from a decedent
- Washington Department of Revenue, Estate tax
- Oregon Department of Revenue, 2025 Form OR-706 Instructions
- Massachusetts Department of Revenue, 2023 Massachusetts tax cuts legislation
- New York State Department of Taxation and Finance, Estate tax
- Comptroller of Maryland, What you need to know about Maryland's estate tax
- Hawaii Department of Taxation, Form M-6 Instructions (2025)