The federal estate tax — sometimes called the 'death tax' — applies to the transfer of wealth at death and tops out at 40%. Relatively few estates actually owe federal estate tax. For 2026, current IRS guidance lists a $15 million basic exclusion per individual ($30 million for a married couple using portability), meaning the vast majority of Americans face no federal liability. High-net-worth families should still review current federal and state rules with qualified advisers.
How the Federal Estate Tax Works
The federal estate tax uses a graduated bracket system with rates up to 40%, but because the unified credit effectively eliminates tax on amounts below the exemption, the practical effect is a near-flat 40% rate on everything above the threshold. The calculation starts with the gross estate — virtually everything you own at death — and then subtracts allowable deductions: the unlimited marital deduction (assets to a U.S. citizen spouse), charitable bequests, debts and mortgages, funeral expenses, and administrative expenses.
What remains is the taxable estate. If this amount exceeds the federal exemption ($15M in 2026), the excess is taxed. Married couples may use portability so the surviving spouse can inherit the deceased spouse's unused exemption (DSUE — Deceased Spousal Unused Exemption), potentially providing up to $30M of combined federal protection in 2026 when the election and other requirements are satisfied.
State Estate and Inheritance Taxes
Even if your estate falls below the federal threshold, you may owe state-level taxes. Twelve states plus Washington, D.C. impose their own estate taxes, with exemptions dramatically lower than the federal level. Massachusetts uses a $2 million filing threshold for deaths in 2023 and later, while Oregon's threshold is $1 million. The calculator includes the District of Columbia and these estate-tax jurisdictions as directional comparisons, not state-return calculations.
Separately, six states impose inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Inheritance taxes are paid by heirs receiving assets, not the estate itself, and rates typically vary based on the heir's relationship to the decedent. This calculator does not estimate those beneficiary-level taxes.
Key Planning Strategies
The most effective estate tax planning combines several approaches layered over time. The annual exclusion gift ($19,000 per recipient in 2026) is the simplest: each year you can reduce your taxable estate by making gifts to family members without using any of your lifetime exemption. A couple with four adult children and eight grandchildren could transfer $456,000 per year using annual exclusion gifts, subject to the rules for gift splitting and eligible recipients.
For larger estates, irrevocable trusts are one planning tool. An Irrevocable Life Insurance Trust (ILIT) may remove life insurance proceeds from the estate while keeping proceeds available to pay estate taxes. A Grantor Retained Annuity Trust (GRAT) may transfer appreciation in suitable assets with limited gift-tax value. Charitable Remainder Trusts (CRTs) can provide income during life, reduce the estate, and benefit a charity at death.
Current law and planning outcomes depend on the date of death, prior gifts, portability elections, trust terms, and state law. Spousal Lifetime Access Trusts (SLATs) may fit some married couples, but irrevocability, loss of direct access, beneficiary changes, and the reciprocal trust doctrine require qualified legal and tax counsel. For upcoming exclusion adjustments and gifting thresholds, explore our 2027 Estate & Gift Tax reference page.