Estate Tax Calculator

What Is an Estate Tax?

An estate tax is a federal tax imposed on the transfer of a deceased person's estate to their heirs. Often called the "death tax," it applies only to the portion of an estate's value that exceeds a set exemption threshold. For 2025, the federal lifetime exemption is $13.99 million per individual. Estates below this threshold owe no federal estate tax. Above it, the tax rate is a flat 40% on the excess amount.

How Federal Estate Tax Is Calculated

Calculating estate tax involves several steps:

Sum all assets - real estate, investments, savings, retirement accounts, life insurance payouts, and other property.
Subtract allowable deductions - debts, mortgages, funeral expenses, charitable contributions, and state estate taxes paid.
Determine the gross taxable estate - assets minus deductions.
Apply the federal exemption - subtract the available exemption (reduced by any lifetime gifts already used).
Calculate tax at 40% on the remaining taxable amount.

Federal Estate Tax Exemption History

The federal estate tax exemption has changed significantly over the years. From $675,000 in 2001, it grew to $11.18 million in 2018 after the Tax Cuts and Jobs Act doubled the exemption. It currently stands at $13.99 million for 2025 and is expected to reach around $15 million in 2026.

What Assets Are Included in an Estate?

The gross estate includes virtually all property you own or have an interest in at the time of death, including:

Real estate (residence, vacation homes, investment properties)
Stocks, bonds, mutual funds, and brokerage accounts
Savings accounts, CDs, and checking balances
Retirement accounts (IRAs, 401(k)s)
Life insurance proceeds (if you hold the policy)
Vehicles, boats, jewelry, and personal property
Business interests and intellectual property

What Deductions Reduce Estate Tax?

Several deductions can reduce your taxable estate:

Marital deduction - transfers to a surviving spouse are generally unlimited and not taxable.
Charitable deduction - amounts left to qualifying charitable organizations are fully deductible.
Debts and mortgages - outstanding liabilities reduce the gross estate.
Funeral and administration costs - reasonable costs of settling the estate.
State estate taxes paid - deductible from the federal taxable estate.

The Lifetime Gift and Estate Tax Exemption

The federal estate tax exemption is unified with the lifetime gift tax exemption. If you made tax-free gifts above the annual exclusion ($18,000 per recipient in 2024) during your lifetime, those amounts reduce the exemption available at death. For example, if you gifted $2 million over your lifetime, only $11.99 million of the $13.99 million exemption remains for your estate.

State Estate Taxes

Many U.S. states have their own estate or inheritance taxes with lower exemption thresholds. States like Massachusetts, Oregon, and Washington have exemptions as low as $1 million. This calculator focuses on federal estate tax; consult a local tax professional for state-specific obligations.

Frequently Asked Questions

Who pays the federal estate tax?

The estate itself pays the tax before assets are distributed to heirs. The executor or personal representative is responsible for filing IRS Form 706 (the estate tax return) and arranging payment. Heirs typically receive assets after taxes are settled.

What is the federal estate tax exemption for 2025?

The federal estate tax exemption for 2025 is $13.99 million per individual (up from $13.61 million in 2024). Married couples can combine their exemptions, potentially shielding up to $27.98 million from federal estate tax using portability rules.

Does my spouse inherit my estate tax-free?

Yes, under the unlimited marital deduction, transfers of assets to a surviving U.S. citizen spouse are generally not subject to federal estate tax. However, assets passed to other heirs (children, other beneficiaries) are subject to estate tax above the exemption amount.

How does lifetime gifting affect estate taxes?

The estate tax exemption is unified with the lifetime gift tax exemption. Taxable gifts made during your lifetime (amounts above the annual exclusion per recipient) reduce your remaining estate tax exemption dollar-for-dollar. The annual exclusion for 2024 is $18,000 per recipient, and gifts within this limit do not reduce your exemption.

Is life insurance included in my estate?

Life insurance proceeds are included in your taxable estate if you hold "incidents of ownership" over the policy - meaning you own the policy or have the power to change beneficiaries. To exclude life insurance from your estate, consider transferring the policy to an Irrevocable Life Insurance Trust (ILIT).

Are retirement accounts like IRAs and 401(k)s taxed at death?

Yes, retirement account balances (IRAs, 401(k)s) are included in your gross estate for estate tax purposes. Additionally, when heirs withdraw funds, they may owe income tax on distributions. This "double taxation" makes retirement accounts an important consideration in estate planning strategies.

What happens if I can't pay the estate tax?

The IRS provides options for estates that cannot immediately pay. Section 6166 allows estates with closely held business interests to spread estate tax payments over up to 14 years. Estates may also elect to pay in installments or seek a short-term extension. Interest and penalties apply if taxes are not paid on time.

What is the difference between estate tax and inheritance tax?

An estate tax is paid by the estate before assets are distributed, while an inheritance tax is paid by the individual heirs who receive assets. The federal government imposes an estate tax, not an inheritance tax. However, some states (like Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) collect inheritance taxes from beneficiaries.

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