How to use the Estate Tax Calculator
- Enter the gross estate: property, investments, business interests and life insurance you own outright.
- Enter the applicable federal exemption for the year of death.
- Enter your state's estate tax rate if it levies one — a dozen or so states do.
- Read the taxable estate and the net amount passing to heirs.
How the calculation works
Federal estate tax applies only to the amount above the unified credit exemption, and the top marginal rate of 40% applies to nearly all of that excess given how quickly the lower brackets are exhausted. Modelling the excess at 40% is therefore accurate for practically every taxable estate.
Portability lets a surviving spouse inherit the deceased spouse's unused exemption, effectively doubling it for a married couple — but only if a timely estate tax return is filed to elect it, which is the single most common planning failure.
Life insurance you own is included in your gross estate, which surprises many families. Holding a policy in an irrevocable life insurance trust removes it, and lifetime annual exclusion gifts reduce the estate without consuming the exemption.
Federal tax = max(estate − exemption, 0) × 40%; Net to heirs = estate − federal − stateSource: Internal Revenue Code §2001 and §2010; IRS Form 706 instructions and annual exemption amounts.
Worked example
An $18,000,000 estate against a $13,610,000 exemption, no state estate tax.
- Taxable estate is $4,390,000.
- At 40%, federal tax is $1,756,000.
About $16,244,000 passes to heirs, with $1.76 million lost to federal estate tax.
Frequently asked questions
Is the exemption permanent?+
No. The elevated exemption is scheduled to fall by roughly half when current provisions sunset, which drives most current planning.
Do heirs pay income tax on the inheritance?+
Generally no, and inherited assets typically receive a stepped-up cost basis. Inherited retirement accounts are the main exception.
How do state estate taxes differ?+
Several states levy their own with far lower exemptions — some near $1–2 million — so a federally exempt estate can still owe state tax.
Last reviewed September 1, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.