About the Estate Tax Calculator
An estate tax calculator estimates federal estate tax on the transfer of assets at death. The federal estate tax applies only to very large estates — most U.S. households are far below the exemption threshold and pay nothing — but for those above, the tax is substantial (40% on amounts over the exemption). Many states also impose their own estate or inheritance taxes with much lower exemptions, making state-level planning relevant for far more families than the federal threshold suggests.
Federal exemption and the 2026 sunset
The federal estate tax exemption per individual is currently very high — the post-TCJA exemption is in the multi-million dollar range and has been indexed for inflation. Estates below the exemption owe no federal estate tax; estates above the exemption owe 40% on the excess. Married couples can effectively double the exemption through portability (the surviving spouse can use the deceased's unused exemption with proper Form 706 election).
The TCJA-era exemption is scheduled to sunset at the end of 2025 absent legislative action — reverting to roughly half its current level (inflation-adjusted from the pre-TCJA $5M baseline). Estates that fall above the post-2025 exemption but below the current one face a planning urgency: gifting strategies that lock in current exemption levels before sunset can permanently shield value.
What's included in the gross estate
The gross estate includes nearly everything you own at death: real estate, brokerage and retirement accounts, business interests, life insurance proceeds (if you owned the policy), personal property, and certain transfers within 3 years of death. Joint property is included at its full value with adjustments for spousal versus non-spousal joint owners.
Deductions reduce the gross estate to taxable estate: marital deduction (unlimited — transfers to a surviving spouse are not taxed), charitable deduction (unlimited — bequests to qualifying charities are not taxed), debts and administrative expenses, and certain other deductions. The marital deduction in particular allows estates to defer all federal estate tax until the second spouse's death, which is why estate planning so often distinguishes between "first death" and "second death" tax implications.
State estate and inheritance taxes
About a dozen states impose their own estate or inheritance taxes. Estate taxes (paid by the estate before distribution) exist in MA, CT, NY, IL, MD, OR, RI, MN, ME, VT, HI, WA, DC. Inheritance taxes (paid by recipients, with rates varying by relationship to the deceased) exist in IA, KY, MD, NE, NJ, PA. State exemptions are much lower than the federal — Massachusetts, for example, taxes estates above $2 million; Oregon above $1 million. For many families, state tax matters far more than federal.
Domicile matters. State estate tax is generally imposed by the state where the decedent was domiciled at death. Some retirees relocate to no-estate-tax states (FL, TX, NV, etc.) specifically for this reason — a permanent residency change can save hundreds of thousands or millions in state estate tax for high-net-worth households. The change must be genuine; states aggressively challenge ambiguous "snowbird" cases.
Common planning tools
Annual gift exclusion: each individual can give up to a per-recipient annual amount (regularly indexed for inflation; check current year) to as many recipients as desired, with no gift-tax filing required. Over years, this can move substantial value out of the estate for couples gifting to children and grandchildren.
Spousal Lifetime Access Trust (SLAT), Grantor Retained Annuity Trust (GRAT), Irrevocable Life Insurance Trust (ILIT), and similar vehicles allow more sophisticated estate-tax avoidance for higher-net-worth families. These require legal expertise — the rules are intricate and the cost of error is permanent.
Step-up in basis: assets in the estate generally receive a basis adjustment to fair market value at date of death. Heirs sell with much-reduced capital gains. This is one of the most powerful planning concepts in U.S. tax — appreciated assets held until death typically eliminate built-in capital gains entirely (subject to the estate tax separately). The interaction between estate tax and step-up is a frequent area of professional advice.
Worked examples
Estate well below federal exemption
Single decedent's gross estate: $4 million. With the current federal exemption ($13.6M for 2024), no federal estate tax. State exemption depends on the state — in Massachusetts ($2M exemption), the estate would owe state estate tax on the $2M above the threshold.
Estate above federal exemption
Single decedent's gross estate: $20 million in 2024. Federal exemption: $13.6M. Taxable estate: $6.4M. Federal tax: 40% × $6.4M ≈ $2.56M. Marital deduction for any spousal transfers reduces this; charitable deductions reduce it further.
Spousal portability
First spouse dies in 2024 with $4M of unused federal exemption. With timely Form 706 election, surviving spouse can use both exemptions — effectively raising the second spouse's exemption to $13.6M + $4M = $17.6M. Failing to file Form 706 timely permanently forfeits the unused exemption — a costly oversight in estates near the threshold.
Frequently asked questions
Will my estate owe federal estate tax?
Almost certainly not — fewer than 0.1% of estates in recent years have. The federal exemption is in the multi-million range and married couples can effectively double it via portability. State estate tax is much more likely to apply (and at lower thresholds) for households in the dozen-or-so states that impose it.
What's the difference between estate tax and inheritance tax?
Estate tax is paid by the estate before assets are distributed. Inheritance tax is paid by recipients and varies by relationship to the deceased (spouses are typically exempt; distant relatives or unrelated heirs pay the most). The federal government has only an estate tax. About a dozen states have one or the other; Maryland is the only state with both.
How do gifts during life affect estate tax?
Gifts use up part of your unified estate-and-gift exemption — the federal amount applies to gifts during life plus transfers at death combined. The annual exclusion (an inflation-indexed amount per recipient per year) doesn't count against the unified exemption. Gifts above the annual exclusion are reported on Form 709 and reduce the amount you can pass tax-free at death.
What is portability of spousal exemption?
When one spouse dies, the surviving spouse can use the deceased's unused federal estate-tax exemption, effectively doubling the exemption available at the second death. Portability requires timely filing of Form 706 even if no estate tax is owed at the first death — a common, costly oversight.
Are life insurance proceeds taxable?
Life insurance proceeds are generally income-tax-free to beneficiaries. But they're includable in the deceased's gross estate if the deceased owned the policy at death — meaning large policies can push estates above the exemption. Irrevocable Life Insurance Trusts (ILITs) can hold policies outside the estate to avoid this.
What is step-up in basis?
When assets pass through an estate, their cost basis is generally adjusted to fair market value at date of death. Heirs who sell shortly after pay capital gains tax only on appreciation between the date of death and the sale date — not on appreciation during the deceased's lifetime. This eliminates significant built-in capital gains for many estates.