Estate Tax Calculator

How the Federal Estate Tax Works in 2026

The federal estate tax is a tax on the transfer of a deceased person's assets to their heirs. It applies to the total value of the estate — including real estate, investments, business interests, retirement accounts, life insurance proceeds, and personal property — minus allowable deductions. Only estates that exceed the federal exemption threshold owe any estate tax, which means the vast majority of Americans are completely unaffected.

For 2026, the federal estate tax exemption is $15 million per individual. Married couples can effectively shelter up to $30 million through portability, which allows a surviving spouse to claim the unused portion of their deceased spouse's exemption. According to IRS data, fewer than 0.1% of estates — roughly 2,500 per year — owe any federal estate tax. But for those that do, the tax can be substantial, with rates ranging from 18% to a top rate of 40%.

The estate tax is calculated on a graduated bracket system identical to the gift tax brackets, since both are part of the unified transfer tax system. After subtracting deductions (charitable bequests, marital deduction, debts, funeral expenses, administrative costs) and the exemption amount, the remaining taxable estate is subject to rates starting at 18% on the first $10,000 and climbing to 40% on amounts exceeding $1,000,000.

Estate Tax vs. Inheritance Tax: Key Differences

A common point of confusion is the difference between estate tax and inheritance tax. They are two distinct taxes that operate very differently:

• Estate tax is paid by the estate itself before any assets are distributed to beneficiaries. It is a federal tax (and applies in 12 states + DC). The executor files the estate tax return (IRS Form 706) and pays any tax owed from estate assets.
• Inheritance tax is paid by the individual beneficiaries who receive assets. There is no federal inheritance tax. Only 6 states impose one: Iowa (being phased out by 2025), Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. The tax rate often depends on the beneficiary's relationship to the deceased — spouses and direct descendants typically pay lower rates or are exempt entirely.
• Maryland is unique in having both an estate tax and an inheritance tax. An estate in Maryland could potentially be subject to both, though the estate tax exemption ($5 million) and inheritance tax exemptions for close relatives prevent most families from facing a double hit.

Understanding which tax applies in your state is critical for planning. Use the state selector in our calculator above to see whether your state imposes its own estate tax with a lower exemption than the federal threshold.

State Estate Taxes: The Hidden Trap for Many Families

While the $15 million federal exemption means most families will never owe federal estate tax, state estate taxes can hit much lower. Oregon's exemption is just $1,000,000, and Massachusetts starts at $2,000,000. A family with a paid-off home, retirement accounts, and a life insurance policy can easily exceed these state thresholds without feeling particularly "wealthy."

The 12 states with estate taxes and their 2026 exemptions are:

• Oregon: $1,000,000 (lowest in the nation)
• Rhode Island: $1,774,583
• Massachusetts: $2,000,000
• Washington: $2,193,000 (highest top rate at 20%)
• Minnesota: $3,000,000
• Illinois: $4,000,000
• District of Columbia: $4,710,800
• Maryland: $5,000,000
• Vermont: $5,000,000
• Hawaii: $5,490,000 (highest top rate at 20%)
• Maine: $6,800,000
• New York: $6,940,000 (with a "cliff" that taxes the entire estate if it exceeds 105% of the exemption)
• Connecticut: $15,000,000 (matches the federal exemption)

New York's "cliff" provision is particularly dangerous: if your estate exceeds $7,287,000 (105% of the $6,940,000 exemption), you lose the exemption entirely and owe tax on the full estate value. This can result in an effective marginal rate well above 100% on the amount just above the cliff threshold.

Estate Planning Strategies to Reduce Estate Tax

For estates that may exceed the federal or state exemption, several proven strategies can substantially reduce or eliminate estate tax liability:

• Lifetime gifting: Use the $19,000 annual gift tax exclusion to transfer wealth during your lifetime. A married couple gifting $38,000 per year to each of 5 family members transfers $190,000 annually without touching the lifetime exemption. Over 20 years, that removes $3.8 million (plus growth) from the taxable estate.
• Irrevocable Life Insurance Trust (ILIT): Life insurance proceeds are included in your taxable estate if you own the policy. By transferring the policy to an ILIT, the death benefit passes to beneficiaries estate-tax-free. A $5 million life insurance policy in an ILIT for someone in the 40% bracket saves $2 million in estate taxes.
• Charitable Remainder Trust (CRT): Transfer appreciated assets to a CRT, receive income during your lifetime, and the remainder goes to charity at death. The charitable portion is deducted from your taxable estate, and you avoid capital gains tax on the appreciation.
• Portability election: When the first spouse dies, the executor should file Form 706 to elect portability even if no estate tax is owed. This preserves the deceased spouse's unused exemption ($15 million) for the surviving spouse, effectively doubling the couple's exemption to $30 million.
• Qualified Personal Residence Trust (QPRT): Transfer your home to a QPRT while retaining the right to live in it for a set term. If you survive the term, the home passes to heirs at a reduced gift tax value, removing its future appreciation from your estate.
• Family Limited Partnerships (FLPs): Transfer business or investment assets to an FLP, then gift limited partnership interests to heirs at a discount (typically 25-35% for lack of control and marketability), reducing the taxable value of the transfer.

For real estate holdings that constitute a significant portion of your estate, use the Amortio mortgage calculator to model the equity in your properties and understand how mortgage debt offsets estate value. Property with a $1 million value and a $400,000 mortgage contributes only $600,000 to your gross estate.

OBBBA: The Estate Tax Exemption Is Now $15 Million

The estate tax exemption was originally doubled by the Tax Cuts and Jobs Act (TCJA) of 2017, but those provisions were set to expire after December 31, 2025. Without action, the exemption would have reverted to approximately $7 million per person. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently extended the higher exemption and raised it to $15 million per individual ($30 million for married couples) for 2026, indexed for inflation in future years.

This eliminates the sunset risk that had created urgency for estate planners. However, the historically high exemption still makes proactive planning valuable. The IRS anti-clawback rule remains in effect: gifts made under the current exemption are protected even if future legislation reduces it. Use our gift tax calculator to model lifetime gifting strategies under the $15 million exemption.

For a complete picture of your tax situation, explore our income tax calculator and tax bracket calculator to see how estate planning decisions interact with your current income tax liability. If you are a self-employed business owner with a significant estate, our self-employment tax calculator can help quantify your total tax burden.