Estate Information

Assets
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$
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Deductions
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Estate Tax Formula
Tax = 40% × max(0, Net Estate − Exemption)
Net Estate = Gross − Deductions | Exemption = $13,990,000 + DSUE
Ryan O'Connell, CFA
Calculator by Ryan O'Connell, CFA

Estate Tax Results

Gross Estate --
Total Deductions --
Net Estate --
Available Exemption --
Taxable Estate --
Federal Estate Tax --
Effective Tax Rate --
Estate After Tax --
Exemption Remaining --

Formula Breakdown

Tax = 40% × max(0, Net Estate − Available Exemption)
Per IRC 2001 — Applicable credit method

Estate Breakdown

Estate Tax Waterfall
Estate Composition
Exemption Usage

Model Assumptions

  • Uses the 2025 federal estate tax exemption of $13,990,000 per individual
  • Tax rate of 40% on amounts above the exemption (per IRC 2001 applicable credit method)
  • Portability per IRC 2010(c) — surviving spouse may elect deceased spouse's unused exemption (DSUE)
  • No state estate or inheritance tax modeled (only 12 states + DC impose one)
  • No generation-skipping transfer tax (GSTT)
  • No gift tax integration — lifetime taxable gifts are not tracked and could reduce the available exemption
  • No valuation discounts for business interests or illiquid assets
  • Marital deduction is unlimited for U.S. citizen spouses (non-citizen spouses may require a QDOT)
  • Charitable deduction is unlimited for qualified organizations
  • Assumes U.S. citizen or resident decedent (nonresident noncitizens use different rules)
Educational Disclaimer

For educational purposes only. Not tax or legal advice. The 2025 exemption of $13,990,000 was established by the Tax Cuts and Jobs Act of 2017 and its future status depends on Congressional action. Consult an estate planning attorney for personalized guidance.

Understanding Federal Estate Tax

What is Federal Estate Tax?

Federal estate tax is a tax on the transfer of assets from a deceased person's estate to their heirs. It applies only to estates that exceed the basic exclusion amount ($13,990,000 for 2025). The tax is paid by the estate before assets are distributed to beneficiaries.

Estate Tax Formula
Tax = 40% × max(0, Net Estate − Available Exemption)
Net Estate = Gross Estate − Deductions | Available Exemption = $13,990,000 + DSUE

Key Concepts

Marital Deduction

Unlimited transfers to spouse
Any amount passing to a surviving U.S. citizen spouse is fully deductible, effectively deferring estate tax until the surviving spouse's death.

Portability (DSUE)

Transfer unused exemption to spouse
A surviving spouse can use the deceased spouse's unused exemption amount (DSUE), potentially doubling the available exemption to $27,980,000.

How Estate Tax Is Computed

  1. Calculate Gross Estate — Sum all assets: real estate, investments, retirement accounts, life insurance, business interests, and other property.
  2. Subtract Deductions — Marital deduction, charitable bequests, debts, and administrative costs reduce the estate.
  3. Determine Net Estate — Gross estate minus deductions.
  4. Apply Exemption — The $13,990,000 basic exclusion (plus any DSUE) shields the estate from tax.
  5. Compute Tax — 40% of the amount above the exemption (per the IRC 2001 applicable credit method).
Important: This calculator estimates federal estate tax only. State estate and inheritance taxes, gift tax integration, and generation-skipping transfer tax are not included. Prior lifetime taxable gifts can reduce the available exemption.

Frequently Asked Questions

The 2025 federal estate tax exemption is $13,990,000 per individual. This means estates valued below this threshold owe no federal estate tax. For surviving spouses who have elected portability (DSUE), the combined exemption can be up to $27,980,000. This exemption is indexed for inflation and was significantly increased by the Tax Cuts and Jobs Act of 2017.

Portability allows a surviving spouse to use the deceased spouse's unused exemption (DSUE). For example, if the first spouse dies with a $5 million taxable estate and a $13,990,000 exemption, the unused $8,990,000 can transfer to the surviving spouse, giving them a total exemption of $22,980,000. Portability must be elected by filing a timely estate tax return (Form 706), even if no tax is owed. The DSUE comes from the last deceased spouse only.

The marital deduction allows unlimited transfers between spouses without estate tax. Any amount passing to a surviving U.S. citizen spouse is fully deductible from the gross estate. This effectively defers estate tax until the surviving spouse's death. Note that transfers to non-citizen spouses may require a Qualified Domestic Trust (QDOT) to qualify for the deduction. Certain terminable interests may also require a QTIP election.

Federal estate tax is computed using the applicable credit method under IRC 2001. First, the gross estate is reduced by deductions (marital, charitable, debts, administrative costs) to determine the net estate. A tentative tax is computed on the full net estate using the unified rate schedule, and then the applicable credit amount (equivalent to the tax on the exemption) is subtracted. For estates above the $13,990,000 exemption, this effectively means a 40% tax rate on the excess amount.

Estate tax is levied on the deceased person's estate before distribution to heirs. It is a federal tax (and imposed in some states). Inheritance tax, by contrast, is imposed on the beneficiaries who receive assets and exists only at the state level (5 states currently impose it). The federal government does not impose an inheritance tax. This calculator estimates federal estate tax only and does not include state-level taxes.

The current $13,990,000 exemption was established by the Tax Cuts and Jobs Act of 2017 and was originally scheduled to sunset after December 31, 2025. Check current legislation for the latest status, as Congress may extend, modify, or allow the provisions to expire. If the exemption reverts, it could drop to approximately $7 million (adjusted for inflation). This potential change makes estate planning particularly important for estates between $7M and $14M.
Disclaimer

This calculator is for educational purposes only and provides estimates of federal estate tax. Actual estate tax liability involves additional factors including lifetime gift tax integration, state estate and inheritance taxes, valuation discounts, and trust structures. This tool should not be used as a substitute for professional estate planning advice. Consult an estate planning attorney and tax professional for personalized guidance.

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