The Texas estate tax rate is zero. Texas does not collect an estate tax or an inheritance tax, so nothing is owed to the state when a Texas resident dies, regardless of the estate’s size. Federal estate tax is a separate matter: it applies a graduated rate of 18% to 40% on the portion of an estate that exceeds the federal exemption, which is $15 million per individual for 2026.
No State-Level Estate or Inheritance Tax
Texas repealed its death tax statute in 2015, and no replacement has been enacted. There is no state estate tax return to file, no payment owed to the Texas Comptroller, and no state filing obligation at death. Roughly 17 states and the District of Columbia still collect their own estate or inheritance taxes; Texas is not among them.
The two taxes work differently, and it’s worth separating them. An estate tax is charged against the total value of what the deceased person owned before anything is distributed. An inheritance tax is charged to each person who receives property, often at rates that change based on the heir’s relationship to the deceased. Texas imposes neither. A child, spouse, or other beneficiary takes their full share with nothing withheld at the state level.
That absence eliminates a layer of paperwork that families in other states have to handle. In inheritance-tax states, each beneficiary may need to file a separate return. Texas heirs skip that entirely. The only tax questions left for someone inheriting in Texas are federal.
Federal Estate Tax Rates for 2026
The federal government taxes large estates under the graduated rate structure in 26 U.S.C. § 2001. Rates begin at 18% on the first $10,000 of taxable value and climb through 12 brackets, topping out at 40% on amounts more than $1 million above the exemption threshold.1Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax Only the portion above the exemption is taxed, so the schedule matters only for very large estates.
The 2026 individual exemption is $15 million. That figure comes from the One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025, which amended 26 U.S.C. § 2010(c)(3) to set the basic exclusion at $15 million beginning in 2026.2Internal Revenue Service. What’s New – Estate and Gift Tax The amount adjusts for inflation in later years.3Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax Without this law, the exemption would have dropped to roughly $7 million when the Tax Cuts and Jobs Act provisions expired at the end of 2025.
A worked example makes the rate real. An unmarried Texas resident who dies in 2026 with a $17 million estate owes federal estate tax only on the $2 million above the exemption. The tax on that $2 million works out to $745,800 under the graduated schedule. The first $15 million passes tax-free.
What Married Couples Can Shelter
Married couples can effectively protect up to $30 million from federal estate tax through portability. When the first spouse dies, any unused portion of their $15 million exemption can pass to the surviving spouse. The IRS calls this the deceased spousal unused exclusion, or DSUE.4Internal Revenue Service. Frequently Asked Questions on Estate Taxes
Portability is not automatic. The executor of the first spouse’s estate must file Form 706 and make the election, even when no tax is owed. The return is due nine months after death, plus any extension. For estates not otherwise required to file, a simplified method allows the portability election up to five years after death.5Internal Revenue Service. Instructions for Form 706 If the first spouse’s executor never files, the surviving spouse loses access to that unused exemption permanently.
The Community Property Step-Up Advantage
Texas is one of nine community property states, and that status creates a real federal tax benefit when a spouse dies. Under federal law, inherited property generally receives a step-up in basis, meaning its cost basis resets to fair market value at the date of death.6Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent The reset wipes out capital gains tax on any appreciation during the deceased person’s lifetime.
In most states, only the deceased spouse’s half of jointly held property gets the reset. Texas residents get a better result. Because Texas treats marital assets as community property, both halves receive the step-up when the first spouse dies.6Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent Say a couple bought their home for $200,000 and it’s worth $800,000 when one spouse dies. The surviving spouse’s basis in the entire property jumps to $800,000. A sale the next day would trigger zero capital gains tax. In a non-community-property state, the surviving spouse’s half would keep the original $100,000 basis, producing $300,000 in taxable gain on a sale.
Annual Gifting to Reduce a Taxable Estate
The federal gift tax and estate tax share one unified exemption. Lifetime gifts that exceed the annual exclusion count against your $15 million lifetime exemption, cutting into what’s left to shelter the estate at death. For 2026, the annual gift tax exclusion is $19,000 per recipient.7Internal Revenue Service. Gifts and Inheritances Married couples who elect gift-splitting can give up to $38,000 per recipient without touching their lifetime exemptions.8Internal Revenue Service. Frequently Asked Questions on Gift Taxes
Texas does not impose its own gift tax. Only the federal rules apply. For families whose estates are approaching the $15 million line, annual gifting is one of the simplest ways to move wealth out of the taxable estate over time. A couple with three children and six grandchildren could transfer up to $342,000 per year ($38,000 to each of nine recipients) with no gift tax reporting requirement.
When Form 706 Is Required
If a federal estate tax return is required, the executor files IRS Form 706. A return must be filed when the gross estate plus lifetime taxable gifts exceeds the filing threshold, which is $15 million for 2026 deaths.9Internal Revenue Service. Estate Tax Smaller estates must still file if the executor wants to elect portability for the surviving spouse.
Preparing the return means pulling together a full inventory of what the deceased owned: real estate, brokerage accounts, business interests, retirement accounts, life insurance proceeds, and personal property of meaningful value. Each asset is valued at fair market value as of the date of death. Several deductions reduce the taxable estate. Funeral expenses, executor fees, attorney and accountant costs, outstanding debts, and mortgages all come off the top. Charitable bequests are fully deductible, and transfers to a surviving spouse who is a U.S. citizen qualify for an unlimited marital deduction.
Deadline and Extensions
Form 706 is due within nine months of the date of death.10Internal Revenue Service. Filing Estate and Gift Tax Returns Filing Form 4768 before that date grants an automatic six-month extension to file.11Internal Revenue Service. About Form 4768 – Application for Extension of Time to File a Return and/or Pay US Estate Taxes The extension covers the paperwork only. Any estimated tax is still due by the original nine-month deadline, and missing that payment date triggers interest and penalties even with a valid filing extension.
Late Filing and Late Payment Penalties
The IRS applies separate penalties for filing late and paying late under 26 U.S.C. § 6651. The failure-to-file penalty is 5% of the unpaid tax per month, capped at 25%. The failure-to-pay penalty is 0.5% per month, also capped at 25%. When both apply at once, the combined maximum can reach 47.5% of the tax owed. The penalties can be waived for reasonable cause, but not knowing the rules rarely qualifies.5Internal Revenue Service. Instructions for Form 706