Estate Tax Calculator
Estimate the federal estate tax liability on an estate based on current tax laws. Calculate your gross estate value, deductions, and potential tax owed to help with estate planning.
Estate Tax Analysis
Gross Estate
Total Deductions
Taxable Estate
Estate Exemption
Amount Over Exemption
Estimated Estate Tax
Estate Composition
Detailed Estate Breakdown
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Understanding Federal Estate Tax
The federal estate tax is a tax on the transfer of property at death. It applies to the total value of a person's estate before distribution to heirs. Understanding how estate tax works is crucial for effective estate planning and ensuring your assets are passed on efficiently to your beneficiaries.
What is Estate Tax?
Estate tax, sometimes called the "death tax," is levied on the fair market value of all assets owned by a deceased person at the time of death. This includes real estate, investments, bank accounts, retirement accounts, life insurance proceeds, business interests, and personal property. The tax is paid by the estate before assets are distributed to heirs.
Important: Estate tax differs from inheritance tax. Estate tax is paid by the estate itself, while inheritance tax (which exists in some states) is paid by the individuals who receive the inheritance.
Lifetime Exemption Amounts by Year
The federal estate tax exemption has changed significantly over the years. Here are the exemption amounts and top tax rates:
| Year | Exemption Amount | Top Tax Rate |
|---|---|---|
| 2026 | $13,610,000 | 40% |
| 2025 | $13,990,000 | 40% |
| 2024 | $13,610,000 | 40% |
| 2023 | $12,920,000 | 40% |
| 2022 | $12,060,000 | 40% |
| 2021 | $11,700,000 | 40% |
| 2020 | $11,580,000 | 40% |
| 2019 | $11,400,000 | 40% |
| 2018 | $11,180,000 | 40% |
Note: The current high exemption amounts are set to sunset after 2025 under the Tax Cuts and Jobs Act of 2017. Without congressional action, the exemption could drop to approximately $6-7 million (adjusted for inflation) in 2026.
How Estate Tax is Calculated
The estate tax calculation follows these steps:
- Step 1: Calculate the Gross Estate - Add up the fair market value of all assets owned at death
- Step 2: Subtract Deductions - Remove allowable deductions including debts, funeral expenses, administrative costs, and charitable gifts
- Step 3: Add Taxable Gifts - Include any taxable gifts made during lifetime (since 1977)
- Step 4: Apply Exemption - Subtract the lifetime exemption amount
- Step 5: Calculate Tax - Apply the estate tax rate (40%) to the amount exceeding the exemption
What's Included in the Gross Estate?
The gross estate includes all assets owned or controlled by the deceased:
- Real Estate: Primary residence, vacation homes, rental properties, land
- Financial Assets: Bank accounts, stocks, bonds, mutual funds, CDs
- Retirement Accounts: 401(k)s, IRAs, pensions (fair market value at death)
- Life Insurance: Death benefits from policies owned by the deceased
- Business Interests: Ownership stakes in businesses, partnerships, LLCs
- Personal Property: Vehicles, jewelry, art, collectibles, furniture
- Trusts: Assets in revocable trusts and certain irrevocable trusts
Allowable Deductions
Several deductions can reduce the taxable estate:
- Marital Deduction: Unlimited deduction for assets passing to a surviving spouse (must be U.S. citizen)
- Charitable Deduction: Full deduction for assets left to qualified charities
- Debts: Outstanding mortgages, loans, credit card balances
- Funeral Expenses: Reasonable costs for burial and services
- Administrative Expenses: Legal fees, executor fees, accounting costs
- State Estate Taxes: Deductible from federal estate tax calculation
Gift Tax and the Unified Credit
The estate tax and gift tax share a unified credit system. The $13.61 million exemption (for 2024) applies to the combined total of lifetime gifts and estate transfers. This means:
- Taxable gifts made during life reduce your available estate tax exemption
- Annual gift tax exclusion ($18,000 per recipient in 2024) doesn't count against lifetime exemption
- Gifts to spouses and charities don't use exemption amounts
Estate Tax Reduction Strategies
1. Spousal Transfers
Assets transferred to a surviving spouse qualify for the unlimited marital deduction and aren't subject to estate tax. This effectively defers taxation until the second spouse's death.
2. Charitable Giving
Bequests to qualified charities are fully deductible from the estate. Consider charitable remainder trusts or charitable lead trusts for more sophisticated planning.
3. Lifetime Gifting
Making gifts during your lifetime can reduce your taxable estate. Use the annual gift tax exclusion ($18,000 per recipient) to transfer wealth tax-free.
4. Irrevocable Life Insurance Trust (ILIT)
Transferring life insurance to an ILIT removes the death benefit from your taxable estate while still providing for beneficiaries.
5. Family Limited Partnerships
These structures can provide valuation discounts for business assets while maintaining family control.
State Estate Taxes
In addition to federal estate tax, some states impose their own estate or inheritance taxes:
- Estate Tax States: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, and DC
- Inheritance Tax States: Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania
- State exemption thresholds are often much lower than federal limits
Portability
Since 2011, the unused portion of a deceased spouse's estate tax exemption can be transferred to the surviving spouse. This "portability" provision effectively allows married couples to shelter up to $27.22 million (2024) from estate tax without complex trust planning.
Planning Tip: While estate tax affects relatively few estates due to the high exemption, proper planning remains important. State estate taxes, potential future changes to federal law, and non-tax considerations like asset protection and family dynamics should all be part of comprehensive estate planning.
Frequently Asked Questions
Who pays estate tax?
The estate itself pays estate tax before assets are distributed to heirs. The executor or personal representative is responsible for filing the estate tax return (Form 706) and paying any tax due.
When is the estate tax return due?
Form 706 must be filed within 9 months of the date of death. A 6-month extension is available if requested.
What if the estate doesn't have cash to pay the tax?
The IRS allows payment plans in certain circumstances. Estates with significant business or farm assets may qualify for extended payment schedules up to 14 years.
Is life insurance included in the estate?
Yes, if the deceased owned the policy or had any "incidents of ownership" (like the ability to change beneficiaries), the death benefit is included in the taxable estate.