Estate Tax Calculator

For 2025, the federal estate tax exemption is $13,990,000 per person. This means an individual can leave up to $13,990,000 to their heirs free of federal estate tax. Estates above this threshold are taxed at a flat 40% rate on the amount exceeding the exemption. This amount was made permanent under 2025 tax legislation — the prior sunset provision that would have reduced the exemption to roughly $7 million in 2026 was eliminated. The exemption is indexed for inflation and may increase in future years. For married couples using portability, the combined exemption is $27,980,000.

Portability allows a surviving spouse to use the deceased spouse's unused federal estate tax exemption. For example, if a husband dies in 2025 and his estate only used $3,000,000 of his $13,990,000 exemption, the remaining $10,990,000 can "port" to his wife — giving her a total exemption of up to $27,980,000. To claim portability, the executor must file a federal estate tax return (Form 706) within 9 months of death (or 15 months with an extension), even if no estate tax is owed. Portability does not apply to state estate taxes — most states do not allow portability. Planning note: portability does not protect future appreciation of assets, while an AB trust strategy shelters both the asset and its future growth from estate tax.

As of 2025, 12 states plus Washington D.C. impose their own estate taxes: Connecticut ($13,610,000 exemption, 12% top rate), Hawaii ($5,490,000, 20%), Illinois ($4,000,000, 16%), Maine ($6,800,000, 12%), Maryland ($5,000,000, 16%), Massachusetts ($2,000,000, 16%), Minnesota ($3,000,000, 16%), New York ($7,160,000, 16%), Oregon ($1,000,000, 16%), Rhode Island ($1,733,264, 16%), Vermont ($5,000,000, 16%), Washington ($2,193,000, 20%), and Washington D.C. ($4,528,800, 16%). The remaining 38 states have no state estate tax. Note that Maryland is unique in having both an estate tax and a separate inheritance tax. If you own real property in a state with an estate tax, that property may be subject to that state's tax even if you are domiciled elsewhere.

Estate tax and inheritance tax are two different taxes, though they are often confused. Estate tax is levied on the total value of the deceased person's estate before assets are distributed to heirs — the estate itself pays the tax. The federal government imposes an estate tax, as do 12 states and D.C. Inheritance tax, on the other hand, is levied on the person receiving the inheritance after the estate has been distributed — heirs pay the tax on what they receive. Only 6 states impose inheritance tax: Iowa (being phased out), Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is the only state with both taxes. Most states exempt spouses and often children from inheritance tax; rates vary by the relationship of the heir to the deceased.

There are several legal strategies to reduce estate tax: (1) Annual gift exclusion giving — you can give $18,000 per recipient per year in 2025 without gift tax consequences, gradually transferring wealth out of your estate over time. (2) Irrevocable Life Insurance Trust (ILIT) — placing life insurance in an ILIT removes the proceeds from your taxable estate, providing liquidity to pay estate taxes. (3) Charitable bequests — gifts to qualifying charities reduce the taxable estate and may reduce income tax during life through charitable remainder trusts. (4) AB Trust / Bypass Trust planning — uses both spouses' exemptions even when one dies first. (5) Grantor Retained Annuity Trusts (GRATs), Spousal Lifetime Access Trusts (SLATs), and Qualified Personal Residence Trusts (QPRTs) are advanced strategies that transfer future appreciation out of your estate. (6) Family Limited Partnerships (FLPs) can value-discount business interests transferred to family members. These strategies require working with a qualified estate planning attorney.

Life insurance proceeds are included in your taxable estate if you own the policy at the time of death — meaning you had any "incidents of ownership" such as the right to change beneficiaries, borrow against the policy, or surrender it. This surprises many people who assume life insurance is always tax-free. While life insurance death benefits are income-tax-free to beneficiaries, they can still increase your estate and trigger estate tax. To remove life insurance from your taxable estate, the policy must be transferred to an Irrevocable Life Insurance Trust (ILIT) at least 3 years before death (the "3-year rule" prevents deathbed transfers). The ILIT owns and is the beneficiary of the policy; proceeds pass outside the estate and are available to heirs free of estate tax. Life insurance still counts toward the taxable estate in the 3-year lookback period after transfer.