Estate Tax Calculator

OBBBA made the $15,000,000 exemption permanent

The Tax Cuts and Jobs Act of 2017 doubled the federal estate/gift lifetime exemption — on the doubled, inflation-indexed schedule it stood at $12,060,000 per person by 2022 and $13,990,000 by 2025. That doubled level was scheduled to sunset on 31 December 2025, reverting to roughly half on 1 January 2026. The One Big Beautiful Bill Act (Public Law 119-21, signed July 2025) eliminated the cliff: §70106 amends IRC §2010(c)(3) to set a new permanent base of $15,000,000 per person starting 2026, indexed for inflation thereafter. No more sunset; no more cliff-driven year-end planning rushes that defined estate practice for the prior two years.

Practical effect: a married couple can now shield $30,000,000 of lifetime wealth combined from federal estate tax through 2026 onward (using portability — see below), with that combined figure inflation-indexed annually. Federal estate tax now reaches only a small fraction of one percent of decedents — but state estate and inheritance taxes, with thresholds far below the federal exemption, catch many more families.

Federal exemption history 2022-2026

The exemption is unified: it covers lifetime taxable gifts and the estate at death combined. The generation-skipping transfer (GST) exemption equals the same per-person amount each year but is tracked and allocated separately — see the GST section below.

How the exemption and unified credit actually work

Form 706 does not simply subtract the exemption from your estate. Mechanically, the tax works in three steps:

1. Compute the tentative tax base. Taxable estate (gross estate minus debts, expenses, and marital/charitable deductions) PLUS adjusted taxable gifts made during life.
2. Apply the §2001(c) rate schedule (table below) to that whole base to get the tentative tax.
3. Subtract the applicable credit amount — the §2001(c) tax on the exemption itself: $5,945,800 for 2026 (the tax on $15,000,000) and $5,541,800 for 2025 (the tax on $13,990,000) — plus a credit for gift tax paid on lifetime gifts.

The credit mechanism is why the graduated brackets below are invisible in practice: the credit fully absorbs the tax on the first $15,000,000 (2026) of the base, so every additional dollar is taxed at the top 40% rate. An estate $1,000,000 over the exemption owes $400,000; one $5,000,000 over owes $2,000,000.

Federal estate tax rate schedule (IRC §2001(c))

The unified rate schedule below is Table A from the IRS Instructions for Form 706. It applies to the tentative tax base — taxable estate plus adjusted taxable gifts — before the unified credit is subtracted. Rates graduate from 18% to 40%; the top bracket starts at $1,000,000.

How to read it: find the row containing your tax base, take the column-C figure, then add the column-D rate on the excess over column A. For any base above $1,000,000 the tax is $345,800 plus 40% of the excess — which, after the unified credit wipes out the tax on the exemption, leaves a flat 40% on every dollar above the exemption.

Worked examples

All three examples are computed with the same engine as the calculator above.

Portability and the DSUE election

A surviving spouse can claim the deceased spouse's unused exemption ("DSUE") — but only by timely filing Form 706 within 9 months of death (15 months with a Form 4768 extension). This is the "portability election." If the first-to-die's estate doesn't owe tax, the family often skips Form 706 to save legal fees — which silently forfeits the DSUE. Lost DSUE in a $15,000,000-per-person world means $15,000,000 of potentially-shielded wealth could become taxable when the second spouse dies.

Rev. Proc. 2022-32 lets executors of estates that weren't otherwise required to file make a late "portability-only" Form 706 election up to 5 years after death via a simplified procedure — much longer than the original 9 months. But the safe move is to file timely. Total cost: typically a few thousand dollars in legal/CPA fees; potential savings: millions of dollars of estate tax on the second death.

DSUE only applies to the federal exemption — not state exemptions, and not the GST exemption (see below). States with their own estate tax generally have NO portability, meaning unused state exemption from the first spouse is lost forever. Bypass trusts (also called credit shelter or A/B trusts) can preserve state exemption — a planning lever that survived the federal portability era despite being "obsolete" at the federal level.

The generation-skipping transfer (GST) tax

The GST tax is a separate, additional transfer tax on wealth that "skips" a generation — transfers to grandchildren, later descendants, or unrelated persons significantly younger than the donor. Without it, a family could avoid one full round of estate tax by leaving assets directly to grandchildren. The GST rate is a flat 40% (the maximum §2001(c) rate), imposed on top of any estate or gift tax on the same transfer.

• The GST exemption equals the estate/gift exemption — $15,000,000 per person in 2026. Under IRC §2631(c) the GST exemption is defined as the basic exclusion amount, so OBBBA's permanent $15,000,000 base flows through automatically and is indexed the same way. It covers direct skips (outright gifts or bequests to skip persons) and allocations to trusts that may later benefit skip persons.
• It must be allocated. Unlike the unified credit, the GST exemption only works when allocated to specific transfers or trusts — typically on Form 709 for lifetime gifts (automatic allocation rules exist but relying on them is risky) or on Form 706 at death. A trust with GST exemption fully allocated has an "inclusion ratio of zero" and stays GST-exempt no matter how large it grows.
• It is NOT portable. The DSUE election covers only the estate/gift exemption. A deceased spouse's unused GST exemption disappears unless it was allocated during life or at death — the main reason wealthy families still build trust structures instead of relying on portability alone.
• Annual exclusion gifts are usually GST-safe. Outright gifts within the $19,000 annual exclusion (2026) to a grandchild generally have a zero inclusion ratio under §2642(c). Gifts in trust must meet stricter requirements to get the same treatment.

Dynasty trusts in states without a rule against perpetuities (Delaware, South Dakota, Nevada, and others) are the classic GST-exemption vehicle: allocate the exemption once, and all future growth passes transfer-tax-free at every subsequent generation.

Annual gift exclusion and lifetime exemption coordination

Two parallel mechanics reduce the taxable estate:

• Annual exclusion gifts ($19,000 per recipient, 2026; $19,000 for 2025). Gifts at or below the annual exclusion don't reduce the lifetime exemption. A couple giving to 12 recipients (say 4 children and 8 grandchildren) moves $456,000 of estate value per year ($38,000 per recipient combined) with zero exemption consumed.
• Lifetime exemption gifts (above the annual exclusion). Taxable gifts during life consume the lifetime exemption dollar-for-dollar; remaining exemption applies at death to whatever estate is left. Report gifts above the annual exclusion on Form 709 (gift tax return). No actual gift tax is owed until cumulative lifetime taxable gifts exceed $15,000,000 per donor (2026).
• Tuition and medical payments (unlimited). Direct payments to a qualified educational institution for tuition (NOT room and board) or directly to medical providers don't count against the annual exclusion or lifetime exemption under §2503(e). Stack these on top of cash gifts to maximize annual transfer capacity.
• Charitable bequests (unlimited). Bequests to qualified charities receive an unlimited charitable deduction from the gross estate — full removal from the taxable base, worth 40% of every donated dollar for a taxable estate (see the worked example above).
• Marital deduction (unlimited). Outright transfers to a US-citizen surviving spouse remove assets from the first-to-die's taxable estate completely — deferring tax until the surviving spouse's eventual death (and preserving the DSUE). Non-citizen spouses need a QDOT to qualify.

Trust strategies for taxable estates

With OBBBA's permanent $15,000,000 base, the legal and trustee costs of complex trust structures often outweigh the federal tax benefit for estates only modestly above the exemption. The bigger drivers for trusts are now state estate tax mitigation, GST exemption allocation, asset protection, and multi-generational governance — not federal exemption planning alone.

Basis step-up at death

Assets held in the decedent's estate at death receive a "step-up" in cost basis to fair market value on the date of death under IRC §1014. Heirs who later sell those assets pay capital gains tax only on appreciation AFTER the date of death — pre-death appreciation escapes tax entirely. For a stock bought decades ago at a small fraction of its date-of-death value, an immediate sale by the heir produces essentially zero capital gain.

The step-up rule is what makes "hold appreciated assets until death" a legitimate strategy for non-taxable estates. Lifetime gifts of appreciated assets transfer the donor's lower basis to the recipient (no step-up), so giving stock during life and bequeathing it at death have very different tax outcomes. For estates that WILL owe tax, the comparison between the 40% estate tax rate and the long-term capital gains rate (plus net investment income tax) heirs would pay after a step-up determines whether keeping the asset in the taxable estate is worth it — see the capital gains tax calculator for the rates that apply to heirs.

State estate and inheritance taxes

The federal exemption is not the end of the story. A dozen states plus DC — including Oregon, Massachusetts, Washington, Minnesota, Illinois, Maryland, New York, Connecticut, Hawaii, Maine, Rhode Island, and Vermont — levy their own estate tax with exemption thresholds far below the federal level, so an estate that owes nothing federally can still owe six or seven figures at the state level. New York's regime has a notorious "cliff": exceed the state exemption by a small margin and the entire estate, not just the excess, becomes taxable.

Separately, 5 states (Pennsylvania, Kentucky, Maryland, Nebraska, New Jersey) impose an inheritance tax — paid by each beneficiary based on their relationship to the decedent rather than by the estate itself. Spouses are exempt everywhere; children, siblings, and unrelated heirs face different rates and per-recipient exemptions by state. Maryland is the only state with both an estate tax and an inheritance tax. Iowa fully repealed its inheritance tax for recent deaths.

Use the inheritance tax calculator to model the state-level, relationship-based tax on each beneficiary's share — it covers every inheritance-tax state with per-class exemptions and rate schedules sourced from the state revenue departments.

Sources

• IRS — Estate Tax
• IRS — Instructions for Form 706
• IRS Rev. Proc. 2024-40 — 2025 Estate Tax Exemption
• IRS Rev. Proc. 2025-32 — 2026 indexed gift/estate exemption
• IRS — Instructions for Form 709