How to Use Our Estate Tax Calculator
To get your estimate, you only need a few key figures. Here’s a simple explanation of each input field.
-
Total Value of Your Gross Estate: This is the total fair market value of everything you own. Don’t worry about being exact to the penny; a close estimate is all you need. Common assets include:
-
Cash and investments (stocks, bonds, mutual funds)
-
Real estate (primary residence, vacation homes, rental properties)
-
Retirement accounts (401(k)s, IRAs, pensions)
-
Business interests
-
Life insurance proceeds (if you own the policy)
-
Vehicles, art, and other valuable personal property
-
Total Debts & Expenses: These are costs that can be deducted from your gross estate, reducing its taxable value. Include estimates for:
-
Mortgages and other outstanding loans
-
Credit card debt
-
Funeral expenses
-
Legal, accounting, and administrative fees for settling the estate
-
State of Residence: Select the state where you legally reside. While our calculator focuses on the federal estate tax, 12 states and the District of Columbia have their own separate estate tax, and 6 states have an inheritance tax. Knowing your state’s rules is an important next step.
-
Lifetime Taxable Gifts: Enter the total value of taxable gifts you have made during your life. A “taxable gift” is any amount given to a single person in one year that exceeds the annual gift tax exclusion ($18,000 for 2024, projected to be $19,000 for 2025). This amount reduces your lifetime exemption.
Understanding Your Results
The final number this calculator provides is your Estimated Federal Estate Tax. This is the amount the federal government would tax your estate before any remaining assets are passed on to your heirs. For the vast majority of people, this number will be $0.
Here is a step-by-step breakdown of how the tax is calculated:
This calculation can be simplified with the following formula:
(Gross Estate−Deductions+Taxable Gifts)−Lifetime Exemption=Taxable Amount
Taxable Amount×Tax Rate=Estimated Estate Tax
Frequently Asked Questions
What is the difference between an estate tax and an inheritance tax?
This is a common point of confusion. The key difference is who pays the tax.
-
Estate Tax: Paid by the deceased person’s estate before the assets are distributed to beneficiaries. The federal government only has an estate tax.
-
Inheritance Tax: Paid by the person receiving the inheritance (the beneficiary). There is no federal inheritance tax, but a handful of states (like Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) currently have one.
How can I legally reduce my estate tax liability?
If your estate is near or above the exemption amount, there are several common strategies financial advisors and attorneys use to legally reduce or eliminate estate taxes:
-
Gifting: You can give up to the annual exclusion amount ($18,000 in 2024) to as many individuals as you like each year, tax-free. This is a simple way to reduce your gross estate over time.
-
Pay Medical or Tuition Bills Directly: Payments made directly to a medical provider or educational institution for someone else do not count against your gift tax exclusion.
-
Create Trusts: Setting up certain types of irrevocable trusts can remove assets from your estate. A very common strategy is an Irrevocable Life Insurance Trust (ILIT) to hold a life insurance policy, removing the death benefit from your taxable estate.
-
Charitable Giving: Assets left to a qualified charity are not subject to estate tax.
What is the federal estate tax exemption for 2025?
For 2025, the federal estate tax exemption is projected to be approximately $14.1 million per person (or $28.2 million for a married couple). This amount is indexed for inflation annually.
Crucial Note for Planning: Under current law, this high exemption amount is scheduled to “sunset” on January 1, 2026. At that time, it will revert to its pre-2018 level of approximately $5 million, indexed for inflation. If your estate is valued between $5 million and $14 million, planning for this change is critical.
What is “portability” and how does it work for married couples?
Portability is a provision that allows a surviving spouse to use any unused portion of their deceased spouse’s federal estate tax exemption. This effectively combines the exemptions of both spouses.
Concrete Example:
-
John and Mary are a married couple. John passes away in 2025 when the exemption is $14.1 million.
-
John’s estate is valued at $4.1 million. It uses $4.1 million of his exemption, leaving $10 million unused ($14.1M – $4.1M = $10M).
-
Mary’s estate can elect for portability. The $10 million of unused exemption is transferred to her.
-
Mary now has her own $14.1 million exemption PLUS John’s unused $10 million, for a total combined exemption of $24.1 million.
To use portability, the deceased spouse’s estate must file a federal estate tax return (Form 706) to report the unused amount, even if no tax is due.
Do I need to include life insurance in my gross estate?
Yes, if at the time of your death, you had any “incidents of ownership” in the policy. This means you owned the policy, had the right to change the beneficiary, borrow against the policy, or cancel it. The entire death benefit—not just its cash value—is included in your estate. As mentioned above, a common strategy to avoid this is to have the policy owned by an Irrevocable Life Insurance Trust (ILIT).
Disclaimer: This information is for educational purposes only and should not be considered tax or legal advice. An estate’s tax liability is complex and depends on individual circumstances. We strongly recommend consulting with a qualified financial advisor and estate planning attorney.
Take the Next Step in Your Financial Planning
Now that you’ve estimated your estate tax, take the next step. If you’re planning on gifting assets to reduce your estate, use our Gift Tax Calculator to see how it works. To get a complete picture of your assets in one place, start with our Net Worth Calculator.
