Estate Tax Calculator

Understanding the Federal Estate Tax

The federal estate tax is a tax on the transfer of property at death. It applies to the value of a person's gross estate—including cash, real estate, investments, business interests, and life insurance proceeds—after subtracting allowable deductions. This Estate Tax Calculator helps you estimate potential liability using the 2025 exemption amount and progressive rate schedule. While the vast majority of estates fall below the exemption threshold, understanding the mechanics is crucial for high‑net‑worth individuals engaged in estate planning.

For 2025, the federal estate tax exemption is $13.99 million per individual. This means an individual can pass up to $13.99 million to heirs without incurring federal estate tax. Married couples can effectively shield up to $27.98 million through "portability," which allows a surviving spouse to use the deceased spouse's unused exemption. Estates valued above the exemption are taxed at rates starting at 18% and rising to 40% on amounts over $1 million.

How the Estate Tax Is Calculated

The calculation follows a structured process:

1. Determine the Gross Estate: Sum the fair market value of all assets owned at death.
2. Subtract Allowable Deductions: These include debts, funeral expenses, charitable bequests, and assets passing to a surviving U.S. citizen spouse (the unlimited marital deduction).
3. Calculate the Taxable Estate: Gross Estate – Deductions = Taxable Estate.
4. Compute Tentative Tax: Apply the progressive rate schedule to the Taxable Estate.
5. Subtract the Applicable Credit Amount: This is the tax that would be owed on the exemption amount ($13.99 million). In 2025, the credit effectively shelters the first $13.99 million from tax.
6. Result = Net Estate Tax Due.

Key Deductions That Reduce Your Taxable Estate

• Unlimited Marital Deduction: Any assets left outright to a surviving spouse who is a U.S. citizen are fully deductible, deferring estate tax until the second spouse's death.
• Charitable Deduction: Bequests to qualified charities reduce the taxable estate dollar‑for‑dollar.
• Debts and Administrative Expenses: Mortgages, credit card balances, funeral costs, and estate administration fees are deductible.

Strategies to Minimize Estate Tax

• Lifetime Gifting: You can give up to $18,000 per recipient annually (2025) without using any of your lifetime exemption. This reduces the size of your estate over time.
• Irrevocable Life Insurance Trust (ILIT): Life insurance proceeds are included in your gross estate unless owned by an ILIT, removing them from taxation.
• Charitable Remainder Trusts (CRT): Provide income to beneficiaries for a term, with the remainder going to charity, reducing estate value and providing a partial charitable deduction.
• Grantor Retained Annuity Trust (GRAT): Transfer appreciating assets to heirs with minimal gift tax impact.
• Use of Portability: Ensure the deceased spouse's unused exemption is preserved by filing IRS Form 706, even if no tax is due.

State Estate and Inheritance Taxes

In addition to federal estate tax, several states impose their own estate or inheritance taxes, often with much lower exemption amounts (e.g., $1 million to $5 million). These state taxes are calculated separately and are not reflected in this federal calculator. If you reside in or own property in a state with an estate tax, consult a local estate planning professional to understand your full exposure.