Estate Tax Calculator

What This Means For You

Understanding Federal Estate Tax

Whether you are looking for a estate tax estimator, calculate estate tax, how to calculate estate tax, estate tax formula, or free estate tax calculator — this free estate tax calculator provides accurate estimates to help you plan and make informed financial decisions.

The federal estate tax applies to the total value of a deceased person's assets above the exemption threshold. In 2026, the exemption is approximately $13.99 million per individual ($27.98 million for married couples). Only estates exceeding these thresholds owe tax — which means fewer than 0.1% of Americans are affected.

The estate includes everything you own at death: real estate, investments, retirement accounts, life insurance death benefits, business interests, personal property, bank accounts, and any other assets. Debts, funeral expenses, and estate administration costs are subtracted. The remaining amount above the exemption is taxed at a graduated rate up to 40%.

Example: A single person dies with $16 million in total assets and $1 million in debts. Net estate: $15 million. Minus exemption ($13.99 million). Taxable estate: $1.01 million. Federal estate tax: approximately $400,000 (at the 40% marginal rate). The effective rate on the total $15 million estate is only 2.7% — the exemption shelters the vast majority.

The Step-Up in Basis: The Most Valuable Tax Break in Estate Planning

When you inherit assets, your cost basis is "stepped up" to the fair market value at the date of death — eliminating all unrealized capital gains that accumulated during the deceased's lifetime. This is arguably the most valuable tax provision in the entire tax code.

Example: Your parent bought stock for $50,000 that is worth $500,000 at death. If they had sold it during life: $450,000 capital gain, $67,500 in tax (15% rate). When you inherit it: your cost basis is $500,000. If you sell immediately, your gain is $0 and your tax is $0. The $67,500 in tax is permanently eliminated — not deferred, eliminated.

This step-up applies to all inherited assets: stocks, real estate, business interests, collectibles. For real estate, it is especially powerful — a home purchased for $100,000 in 1990, worth $600,000 at death, has $500,000 in capital gains erased by the step-up. The heir can sell for $600,000 with zero capital gains tax.

Planning implication: do not sell highly appreciated assets before death if your estate is below the exemption. Holding them until death gives heirs a free step-up. This is the opposite advice from what you would give someone who expects to exceed the estate tax exemption — their strategy involves gifting assets out of the estate during life.

State Estate and Inheritance Taxes

Twelve states and DC impose their own estate tax, often with much lower exemptions than the federal $13.99 million:

Lowest state exemptions: Oregon ($1 million), Massachusetts ($2 million), Connecticut ($13.99 million, matching federal), Maine ($6.8 million), New York ($6.94 million).

Six states impose an inheritance tax (paid by the heir, not the estate): Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Rates and exemptions vary by the heir's relationship to the deceased — spouses are always exempt, children often pay reduced rates, and non-relatives pay the highest rates (up to 15-18%).

Maryland is the only state with both an estate tax AND an inheritance tax — the double hit makes estate planning especially important for Maryland residents with significant assets.

State estate taxes can apply to estates far below the federal exemption. A $3 million estate in Oregon: zero federal tax, but approximately $99,600 in Oregon estate tax. Planning strategies (trusts, gifting, relocation) become relevant at much lower wealth levels when state taxes are considered.

Basic Estate Planning Strategies

Unlimited marital deduction: Everything left to a surviving spouse passes estate-tax-free, regardless of amount. This defers (not eliminates) the tax — the survivor's estate may owe tax at their death on the combined assets.

Portability: A surviving spouse can claim the deceased spouse's unused estate tax exemption. If the first spouse dies with only $4 million in assets (using $4M of their $13.99M exemption), the surviving spouse inherits the unused $9.99M — giving them a combined exemption of $23.98M. Portability must be elected by filing Form 706 within 9 months of death, even if no tax is owed.

Irrevocable life insurance trust (ILIT): Life insurance death benefits are included in your estate if you own the policy. A $2 million policy could create estate tax liability. An ILIT owns the policy instead — removing it from your estate while still providing the death benefit to beneficiaries. The trust must be established at least 3 years before death to be effective.

Annual gifting program: Transfer $19,000/year per recipient ($38,000 per couple) to move assets out of the estate. Over 10 years with 5 recipients: $950,000 removed from the taxable estate, plus all future growth on those gifts.

Frequently Asked Questions