IRS Form 706 – IRS Forms, Instructions, Pubs 2026 – In the complex world of estate planning, IRS Form 706 stands out as a critical document for handling federal estate taxes and generation-skipping transfers. Whether you’re an executor managing a loved one’s estate or a financial advisor guiding clients through tax obligations, understanding Form 706 is essential. This comprehensive guide breaks down everything you need to know about the United States Estate (and Generation-Skipping Transfer) Tax Return, including filing requirements, exemptions for 2026, and step-by-step instructions. With the estate tax exemption adjusting annually, staying informed ensures compliance and minimizes potential penalties.
What is IRS Form 706?
IRS Form 706, officially titled the United States Estate (and Generation-Skipping Transfer) Tax Return, is used by executors to calculate and report the federal estate tax imposed under Chapter 11 of the Internal Revenue Code. It also computes the generation-skipping transfer (GST) tax on direct skips as outlined in Chapter 13. This form provides a detailed accounting of the decedent’s gross estate, including assets like real estate, stocks, bonds, insurance, and more, valued at the date of death or an alternate valuation date.
The form is not just for tax payment—it’s also key for electing portability of the deceased spouse’s unused exclusion (DSUE) amount, which can shield more assets from taxes for the surviving spouse. Recent updates include a redesigned form with separated schedules for efficiency and a reduced estate tax closing letter (ETCL) fee of $56 for requests after May 21, 2025.
Who Needs to File Form 706?
Not every estate requires Form 706. It’s mandatory for the executor of a U.S. citizen or resident’s estate if the total gross estate, plus adjusted taxable gifts (made after December 31, 1976) and specific exemptions, exceeds the basic exclusion amount. Even if no tax is due, filing may be necessary to elect portability of the DSUE, regardless of estate size.
For nonresident noncitizens, use Form 706-NA instead. Special cases include estates with direct skips subject to GST tax or those electing special-use valuation for farm or business property under Section 2032A.
| Filing Requirement | Details |
|---|---|
| Gross Estate Threshold | Exceeds basic exclusion (e.g., $15 million in 2026) + adjusted gifts |
| Portability Election | Required even if below threshold to transfer unused exclusion |
| GST Tax Applicability | For direct skips to skip persons |
Estate Tax Exemption Threshold for 2026
The federal estate tax exemption, also known as the basic exclusion amount, determines the filing threshold for Form 706. For decedents dying in 2026, this amount is $15,000,000 per individual. This is an increase from $13,990,000 in 2025, adjusted for inflation as per annual IRS revenue procedures.
For married couples, portability allows the surviving spouse to use the deceased spouse’s unused exemption, potentially doubling the shield to $30 million. However, this requires a timely Form 706 filing. Note that lifetime gifts can reduce the available exemption, as they are included in the calculation.
Understanding Generation-Skipping Transfer Tax (GSTT)
The generation-skipping transfer tax (GSTT) is a flat 40% tax on transfers to individuals two or more generations below the transferor, such as from grandparents to grandchildren. It’s designed to prevent avoiding estate taxes across generations and applies in addition to regular estate or gift taxes.
GSTT triggers on three events: direct skips, taxable distributions from trusts, and taxable terminations of trusts. The GST exemption matches the estate tax exemption—$15 million in 2026—and is allocated on Form 706’s Schedule R or R-1. For non-relatives, a “skip person” is anyone more than 37.5 years younger.
Use Schedule R for GST tax payable by the estate and R-1 for trusts over $250,000. Strategies like qualified severances can help manage inclusion ratios to minimize tax.
How to File Form 706: Step-by-Step Guide?
Filing Form 706 involves detailed preparation. Here’s a streamlined process:
- Gather Information: Collect the decedent’s SSN, death certificate, will, asset valuations, and prior gift tax returns (Form 709).
- Complete Part I-VI: Enter decedent details, executor info, and compute the taxable estate.
- Fill Schedules A-I: Report assets like real estate (A), stocks/bonds (B), and jointly owned property (E).
- Deductions and Credits (Schedules J-U): Include funeral expenses (J), debts (K), marital deductions (M), and credits like foreign death taxes (P).
- Compute Tax: Use Table A for unified rates; subtract credits, including the applicable credit amount ($6,000,000 basic credit equivalent in 2026).
- Elect Portability if Applicable: Check the box in Part VI and calculate DSUE.
- Submit Electronically or by Mail: Pay any tax due via EFTPS; request direct deposit for overpayments. File at the address listed on IRS.gov.
For complex estates, consult a tax professional to ensure accuracy.
Filing Deadlines and Extensions
Form 706 is due nine months after the date of death. For portability-only filings, relief may be available up to five years via Revenue Procedure 2022-32. Request a six-month extension using Form 4768, which is automatic for filing but requires reasonable cause for payment extensions.
Penalties for late filing or payment can reach 20-25% under Section 6651, plus interest. Understatements may trigger additional penalties under Section 6662.
Required Documents and Schedules
Attach schedules as needed:
- Asset Schedules: A (Real Estate), B (Stocks/Bonds), C (Mortgages/Cash), etc.
- Deduction Schedules: J (Funeral/Admin Expenses), K (Debts), M (Marital), O (Charitable).
- Other Forms: Form 712 (Life Insurance), Form 2848 (Power of Attorney), Form 8971 (Beneficiary Basis).
Include appraisals for special-use valuations and copies of prior returns as exhibits.
Common Mistakes to Avoid When Filing Form 706?
- Missing Portability Election: Failing to file when no tax is due can forfeit DSUE, costing millions in future taxes.
- Valuation Errors: Under- or over-valuing assets; use professional appraisals.
- Incomplete Schedules: Omitting deductions like state death taxes or charitable bequests.
- Late Filings: Always apply for extensions if needed to avoid penalties.
- Ignoring GSTT: Not allocating exemptions properly on Schedule R.
Where to Download IRS Form 706?
Download the latest Form 706 PDF directly from the IRS website at https://www.irs.gov/pub/irs-pdf/f706.pdf. For instructions, visit https://www.irs.gov/pub/irs-pdf/i706.pdf. Always use the revision for the year of death— for 2026 decedents, refer to the August 2025 version or later updates.
Navigating IRS Form 706 doesn’t have to be overwhelming. By understanding the filing thresholds, exemptions, and requirements for 2026, executors can ensure compliance and optimize tax outcomes. For personalized advice, consult a qualified estate tax professional to handle nuances like portability and GSTT allocations. Stay updated via IRS.gov for any legislative changes affecting estate taxes.