Federal Estate Tax Calculator

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Understanding Federal Estate Tax

The federal estate tax, sometimes called the "death tax," is a tax on the transfer of a person's assets to their heirs after death. It's important to note that this is a federal tax; some states also impose their own estate or inheritance taxes. This calculator focuses only on the federal liability.

How the Estate Tax is Calculated

The calculation is a multi-step process:

  1. Determine the Gross Estate: This is the fair market value of everything the person owned at death, including cash, real estate, investments, and other assets.
  2. Subtract Allowable Deductions: Certain expenses and transfers are deducted from the gross estate. These include funeral expenses, debts of the decedent, transfers to a surviving spouse (the unlimited marital deduction), and donations to qualified charities. This gives you the **Adjusted Taxable Estate**.
  3. Apply the Lifetime Exemption: The federal government allows a large portion of an estate to pass to heirs tax-free. This is known as the lifetime exemption. For 2025, this amount is $13.99 million per individual[file:60]. The estate is only taxed on the value *exceeding* this exemption.
  4. Calculate the Tax: A progressive tax rate, which goes up to a maximum of 40%, is applied to the taxable amount to determine the final tax due.

Frequently Asked Questions (FAQ)

What is the difference between estate tax and inheritance tax?

The **estate tax** is paid by the estate of the deceased person before assets are distributed to the heirs. An **inheritance tax**, which is not levied by the federal government but by a handful of states, is paid by the heirs *after* they receive the assets.

What is the unlimited marital deduction?

You can transfer an unlimited amount of assets to your surviving spouse tax-free. The estate tax is typically deferred until the second spouse passes away.

Does this calculator account for state estate taxes?

No. This tool is designed to estimate the U.S. *federal* estate tax only. Several states have their own estate or inheritance taxes with much lower exemptions, which may apply even if no federal tax is due.