Estate Tax Calculator

Introduction

Robert, a 68-year-old retired business owner in Ohio, has an estate worth $18 million. His wife passed away three years ago. For years, his estate attorney told him to worry about the federal estate tax exemption dropping to about $7 million at the end of 2025. Robert made aggressive gifts to his children in 2024, setting up trusts and transferring $4 million to stay ahead of the sunset. Then Congress changed the rules.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. It permanently eliminated the scheduled sunset of the TCJA estate tax exemption. Instead of dropping to $7 million, the exemption climbed to $15 million per individual for 2026. A married couple can now shelter up to $30 million through portability. The top federal estate tax rate remains 40%. According to the IRS estate tax FAQ page, the 2026 filing threshold is $15,000,000. Robert's $18 million estate now owes federal estate tax only on $3 million, not $11 million.

Inputs Required

• Gross Estate Value: Total fair market value of all assets including real estate, investments, business interests, retirement accounts, life insurance proceeds payable to the estate, and personal property
• Debts and Mortgages: Outstanding liabilities including home mortgages, car loans, credit card balances, and other debts reduce the taxable estate
• Charitable Deductions: Assets transferred to qualified charities are fully deductible with no limit
• Marital Deduction: Assets passing to a surviving US citizen spouse qualify for an unlimited marital deduction and are not taxed at all until the surviving spouse passes

Outputs Provided

• Gross Estate Value: Total asset value before any deductions
• Adjusted Estate: Gross value minus all allowable deductions
• Taxable Estate: The amount above the federal exemption that is subject to tax
• Federal Estate Tax: Estimated tax owed using 2026 progressive estate tax rates
• Net Estate to Heirs: What remains after the estate tax is paid
• Effective Tax Rate: Estate tax as a percentage of the adjusted estate

How the Calculation Works

The federal estate tax uses a progressive rate structure, starting at 18% and reaching a maximum of 40% on the taxable estate above $1,000,000. However, the vast majority of the estate is protected by the federal exemption. For 2026, the exemption is $15,000,000 per individual, meaning only the estate value above this threshold is taxed.

Married couples benefit from portability. If one spouse passes away without using their full exemption, the unused portion can be transferred to the surviving spouse, effectively doubling the couple's combined exemption to $30,000,000 in 2026. The executor must file Form 706 to elect portability, even if no estate tax is owed.

For planning your overall tax strategy, use our Income Tax Calculator. To evaluate investment returns that may grow your estate, try our ROI Calculator.

The 2026 Estate Tax Landscape

The federal estate tax exemption has never been higher. Here is how it has changed over time:

• 2017 (pre-TCJA): $5.49 million per individual
• 2018 (TCJA enacted): $11.18 million per individual
• 2024: $13.61 million per individual
• 2025: $13.99 million per individual
• 2026 (OBBBA): $15.00 million per individual ($30 million married with portability)

The OBBBA made the exemption permanent and indexed it for inflation using the Chained Consumer Price Index. According to Lawvex's estate tax analysis, the 2027 exemption will likely be around $15.3 to $15.5 million depending on inflation. The IRS typically announces the inflation-adjusted amount in Revenue Procedure releases during the fall.

Other key 2026 figures: the annual gift tax exclusion is $19,000 per recipient ($38,000 for married couples splitting gifts). The generation-skipping transfer (GST) tax exemption is $15 million. The annual exclusion for gifts to a non-US citizen spouse is $194,000.

How to Use the Calculator

1. Enter the total gross value of all assets in the estate, including life insurance death benefits
2. Enter outstanding debts and mortgages that will be paid from the estate
3. Enter the value of any charitable bequests
4. Enter assets passing directly to a surviving US citizen spouse
5. Review the estimated federal estate tax and net amount passing to heirs
6. Consider whether your state imposes its own estate tax (12 states plus DC do as of 2026)

Example Calculations

Example 1: Individual Estate at $18 Million

Robert's estate is worth $18 million with a $500,000 mortgage and no other deductions. Adjusted estate = $17,500,000. Taxable estate = $17,500,000 - $15,000,000 = $2,500,000. Federal estate tax at up to 40% = approximately $1,000,000. Net estate to heirs = $16,500,000. Effective rate = 5.7%. Without the OBBBA, the exemption would have dropped to about $7 million, and his tax bill would have been approximately $4.2 million on $10.5 million of taxable estate. The new law saved his heirs approximately $3.2 million.

Example 2: Married Couple with $25 Million Estate

James and Patricia have a combined estate of $25 million. James passes away in 2026. His executor elects portability, meaning Patricia can use James's unused $15 million exemption plus her own $15 million, for a total of $30 million. The entire $25 million estate passes to Patricia tax-free under the marital deduction. When Patricia later passes away, her estate can shelter up to $30 million (assuming both exemptions are available through portability). If the estate is still $25 million at her death, the federal estate tax is $0.

Real-World Scenarios

Business Owner with Illiquid Assets

Linda, a 72-year-old restaurant owner in Oregon, owns a chain of 8 restaurants valued at $22 million plus a $3 million home. Her total estate is $25 million. The federal estate tax on $10 million above the exemption is approximately $4 million. However, her assets are tied up in the business. Her heirs may need to sell restaurants at a discount to pay the tax bill within 9 months of her death. IRC Section 6166 allows deferring estate tax on closely held business interests for up to 14 years, but interest still accrues. Linda should consider life insurance in an irrevocable trust to provide liquidity. Oregon also imposes a state estate tax with an exemption of only $1 million, adding another $2.3 million in state tax.

Charitable Giving Strategy

David, a 65-year-old retired tech executive in California, has an estate of $40 million. He wants to leave $10 million to his alma mater. Without charitable giving, his taxable estate is $25 million ($40M - $15M exemption), generating approximately $10 million in federal estate tax. By leaving $10 million to charity, his taxable estate drops to $15 million ($40M - $15M exemption - $10M charitable deduction), generating approximately $6 million in tax. The charitable deduction saves $4 million in federal estate tax while directing $10 million to a cause he cares about.

Portability Election Missed

Michael's wife died in 2024 with an estate of $8 million, well below the $13.61 million exemption. Her executor did not file Form 706 to elect portability because there was no estate tax due. Michael's estate is now $28 million in 2026. Without portability, his exemption is only $15 million, and his taxable estate is $13 million, generating approximately $5.2 million in federal tax. If portability had been elected, his exemption would be approximately $28.99 million (his wife's 2024 unused $13.61M plus his 2026 $15M), and the tax would be $0. Filing Form 706 for portability is now possible under the simplified procedure in Rev. Proc. 2022-32, which extends the filing deadline to 5 years after death. Michael's attorney files a late Form 706 and saves the estate $5.2 million.

Why This Calculation Matters

The federal estate tax affects a very small percentage of estates. With the $15 million exemption in 2026, only estates exceeding that amount face federal tax. However, state estate taxes have much lower thresholds. Oregon's exemption is $1 million. Washington's is $2.193 million. Massachusetts's is $2 million. An estate that owes no federal tax could still owe hundreds of thousands in state estate tax. This calculator helps you estimate federal liability so you can plan accordingly.

For calculating the tax on a specific property sale that may affect your estate, use our Capital Gains Tax Calculator.

Common Mistakes to Avoid

• Forgetting life insurance death benefits: Proceeds from life insurance policies you own are included in your taxable estate. A $5 million policy pushes your estate $5 million closer to the threshold. Consider transferring policies to an irrevocable trust to remove them from your estate
• Missing the portability election: If your spouse dies and their estate is below the exemption, file Form 706 to elect portability even if no tax is due. This preserves their unused exemption for your estate. Rev. Proc. 2022-32 allows late filing up to 5 years after death
• Ignoring state estate taxes: Twelve states plus DC impose their own estate tax with exemptions far below the federal $15 million. Oregon's exemption is $1 million. Your estate could owe zero federal tax but hundreds of thousands in state tax
• Overlooking the 9-month filing deadline: Form 706 is due 9 months after death, with a 6-month extension available. Late filing penalties can reach 5% of the tax due per month, up to 25% total
• Not valuing assets correctly: The estate tax is based on fair market value at death. Real estate and business interests require professional appraisals. Underreporting values can trigger IRS penalties of 20% or more of the underpayment

Limitations of This Calculator

This calculator provides a simplified estimate of federal estate tax liability. It does not account for the full progressive rate structure under IRC Section 2001, which taxes the first $10,000 of taxable estate at 18% and increases gradually to 40% on amounts above $1 million. In practice, the exemption means most taxable estates are taxed at or near 40%. The calculator does not model state estate taxes, which have their own exemption amounts, rate structures, and rules. It does not account for prior taxable gifts that reduce the available exemption, the generation-skipping transfer tax, or special use valuation under IRC Section 2032A for farms and closely held businesses. This tool does not replace a qualified estate planning attorney or tax professional.

Authoritative Research and Resources

• IRS Estate Tax FAQ - The official Internal Revenue Service page with estate tax filing thresholds by year, including the 2026 threshold of $15,000,000. Covers Form 706 filing requirements, portability elections, and basic exclusion amount rules.
• Lawvex: Estate Tax Exemption 2026 - $15M Per Person Made Permanent - Detailed analysis of the One Big Beautiful Bill Act and its impact on estate planning. Explains how the TCJA sunset was eliminated, the new $15 million baseline, and inflation indexing under IRC Section 2010(c)(3).
• Wealthspire: 2026 Federal and State Estate and Gift Tax Cheat Sheet - A comprehensive reference covering federal exemption amounts, annual gift tax exclusions, GST exemption, and state-by-state estate and inheritance tax rates for 2026.