2016 Estate Tax Exemption
The 2016 Estate Tax Exemption is $5,450,000.
Effective 2016-01-01Source: Rev. Proc. 2015-53 (IRS)Verified 2026-09-01
Who it applies to
Estates of decedents dying in calendar year 2016
What changed this year, and why
For 2016, the IRS set the basic exclusion amount for the federal estate tax at $5,450,000. This figure determines the maximum value of a decedent's taxable estate that can pass to heirs without owing federal estate tax, and it also sets the lifetime gift-tax exemption for the same calendar year.
Common questions
- What does the basic exclusion amount mean for estate tax purposes?
- The basic exclusion amount - the maximum value of assets a decedent can pass free of federal estate tax - is $5,450,000.
- Does this exclusion apply to gifts as well?
- The exclusion applies to estates of decedents dying during the 2016 calendar year.
Which estates have to file at all
For a person who died during 2016, Form 706 must be filed by the executor when either of two conditions is met. First, the estate must file if the gross estate plus the decedent's adjusted taxable gifts and specific exemption exceeds the basic exclusion amount of $5,450,000. Second, the estate must file whenever the executor elects portability - that is, to transfer the DSUE (deceased spousal unused exclusion) amount to the surviving spouse - even if the decedent's gross estate is well below $5,450,000. The size test is computed by adding three figures: the gross estate valued as of the date of death, adjusted taxable gifts made by the decedent, and any total specific exemption allowed for gifts made by the decedent. Estates below the threshold that do not need portability generally do not have to file at all.
For decedents who died in 2016, Form 706 must be filed by the executor of the estate of every U.S. citizen or resident: a. Whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $5,450,000; or, b. Whose executor elects to transfer the DSUE amount to the surviving spouse, regardless of the size of the decedent's gross estate.
Instructions for Form 706 (Rev. November 2016), United States Estate (and Generation-Skipping Transfer) Tax Return (IRS)
What counts toward the exemption
For federal estate tax purposes, the gross estate is broadly defined. The gross estate includes all property in which the decedent had an interest (including real property outside the United States). This encompasses far more than just assets held solely in the decedent's name at death. It also captures certain transfers made during life without adequate consideration, annuities, the includible portion of joint estates and tenancies by the entirety, certain life insurance proceeds payable to other beneficiaries, property subject to a general power of appointment, dower or curtesy interests of the surviving spouse, and community property to the extent of the decedent's interest. Even when some of these items pass directly to beneficiaries outside of probate, their value is still counted toward the total gross estate. The total value of the gross estate is then reduced by allowable deductions (such as debts, funeral expenses, administrative costs, and charitable or marital bequests) to arrive at the taxable estate, which is compared against the $5,450,000 basic exclusion amount to determine whether any estate tax is owed.
The gross estate includes all property in which the decedent had an interest (including real property outside the United States).
Instructions for Form 706 (Rev. November 2016), United States Estate (and Generation-Skipping Transfer) Tax Return (IRS)
The nine-month deadline and the extension
The initial deadline to file Form 706 is 9 months after the date of the decedent's death. If the executor cannot meet that date, an automatic 6-month extension of time to file is available by submitting Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, before the original 9-month period expires. The extension adds six months to the filing date but does not extend the time to pay any tax due - interest still accrues on unpaid balances from the original due date. For estates whose only purpose in filing is to elect portability, the same 9-month window (extended by the 6-month extension if granted) is the deadline by which the return must be received; a late portability-only filing is generally ineffective, though relief may be available under Regulation section 301.9100-3 in limited circumstances.
You must file Form 706 to report estate and/or GST tax within 9 months after the date of the decedent's death. If you are unable to file Form 706 by the due date, you may receive an extension of time to file. Use Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, to apply for an automatic 6-month extension of time to file.
Instructions for Form 706 (Rev. November 2016), United States Estate (and Generation-Skipping Transfer) Tax Return (IRS)
Carrying an unused exemption to a surviving spouse
Portability lets the executor of a predeceased spouse transfer any unused portion of the basic exclusion amount - the deceased spousal unused exclusion, or DSUE - to the surviving spouse, who may then apply it against the surviving spouse's own taxable estate or gifts. The election is only effective if Form 706 is filed on time: within 9 months of the decedent's date of death, or within the 6-month extension period if an extension was granted using Form 4768. The election applies regardless of the size of the decedent's gross estate, so even an estate well below the $5,450,000 basic exclusion amount must file a complete and timely Form 706 to carry the DSUE forward. An estate that fails to file timely solely for portability purposes may, in some cases, seek relief under Regulation section 301.9100-3, but that is an exception rather than the rule; the safe course is to treat the 9-month deadline (plus any approved 6-month extension) as absolute for any estate wishing to preserve the portability benefit.
An executor can only elect to transfer the DSUE amount to the surviving spouse if the Form 706 is filed timely; that is, within 9 months of the decedent's date of death or, if you have received an extension of time to file, before the 6-month extension period ends.
Instructions for Form 706 (Rev. November 2016), United States Estate (and Generation-Skipping Transfer) Tax Return (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Rev. Proc. 2015-53 (IRS)
- Basic exclusion amount
For an estate of any decedent dying in calendar year 2016, the basic exclusion amount is $5,450,000 for determining the amount of the unified credit against estate tax under ยง 2010.