Estate Tax Calculator - Calculate Federal and State Estate Tax with Exemptions and Deductions

Understanding Estate Tax

Estate tax, sometimes called the "death tax," is a federal tax on the transfer of property at death. Understanding estate tax is crucial for effective estate planning, especially for high-net-worth individuals. The IRS estate tax rules can be complex, but proper planning can significantly reduce or eliminate estate tax liability.

2024 Federal Estate Tax Exemption

The federal estate tax exemption for 2024 is **$13.61 million** per individual ($27.22 million for married couples using portability). This means that estates valued below this threshold owe no federal estate tax. The exemption is indexed annually for inflation.

Estate Tax Rates

Federal estate tax uses progressive rates from **18% to 40%** on the amount exceeding the exemption. Here's the breakdown:

State Estate Taxes

Twelve states and the District of Columbia impose their own estate taxes with varying exemptions and rates:

• Connecticut: $13.61M exemption (matches federal), 12% top rate
• Hawaii: $5.49M exemption, 20% top rate
• Illinois: $4M exemption, 16% top rate
• Maine: $6.41M exemption, 12% top rate
• Maryland: $5M exemption, 16% top rate (also has inheritance tax)
• Massachusetts: $2M exemption (lowest), 16% top rate
• Minnesota: $3M exemption, 16% top rate
• New York: $6.94M exemption, 16% top rate
• Oregon: $1M exemption (lowest), 16% top rate
• Rhode Island: $1.73M exemption, 16% top rate
• Vermont: $5M exemption, 16% top rate
• Washington: $2.19M exemption, 20% top rate

States with low exemptions like Massachusetts ($2M) and Oregon ($1M) can result in estate tax liability even for moderate estates. You can find more information on state estate tax rates from the Tax Foundation.

Marital Deduction

The unlimited marital deduction allows tax-free transfer of any amount of assets to a surviving spouse who is a U.S. citizen. This is one of the most powerful estate planning tools, allowing couples to defer estate tax until the second spouse dies.

**Key benefits:**

• No limit on amount transferred tax-free
• Applies to lifetime gifts and transfers at death
• Combined with portability, provides up to $27.22M exemption for couples
• Simple will provisions can maximize marital deduction

**Important limitation:** If the surviving spouse is not a U.S. citizen, the marital deduction is limited unless assets are transferred to a Qualified Domestic Trust (QDOT). You may want to use our Tax Calculator to understand income tax implications during estate administration.

Portability

Portability allows a surviving spouse to use any unused portion of their deceased spouse's federal estate tax exemption. This effectively doubles the exemption for married couples to $27.22 million in 2024.

**How it works:**

1. First spouse dies with estate below exemption ($13.61M in 2024)
2. Executor files Form 706 electing portability (even if no tax owed)
3. Unused exemption transfers to surviving spouse
4. Surviving spouse now has combined exemption (their own + deceased spouse's unused)
5. When surviving spouse dies, combined exemption applies to their estate

Charitable Deduction

Assets left to qualified charitable organizations receive an unlimited charitable deduction, reducing your taxable estate dollar-for-dollar. This is an excellent strategy to reduce estate tax while supporting causes you care about.

**Popular charitable giving strategies:**

• Outright bequest: Leave assets directly to charity in your will
• Charitable remainder trust (CRT): Provides income to you or beneficiaries, remainder to charity
• Charitable lead trust (CLT): Provides income to charity for term, remainder to heirs
• Private foundation: Create your own charitable organization
• Donor-advised fund: Contribute now, recommend grants later

Estate Tax Minimization Strategies

1. Annual Gifting

The annual gift tax exclusion allows you to give $18,000 per recipient in 2024 ($36,000 per couple) without using any of your lifetime exemption or filing a gift tax return. A couple with three children and their spouses could gift $216,000 annually ($18,000 × 6 recipients × 2 donors), removing substantial assets from their estate.

2. Irrevocable Life Insurance Trust (ILIT)

If you own a life insurance policy, the death benefit is included in your taxable estate. An ILIT removes the policy from your estate while still providing benefits to your heirs. The trust owns the policy, pays premiums (funded by your annual gift tax exclusion gifts), and distributes death benefits to beneficiaries estate-tax-free.

**Potential savings:** A $5 million life insurance policy could save $2 million in estate tax (40% of $5M) if properly structured in an ILIT.

3. Grantor Retained Annuity Trust (GRAT)

A GRAT allows you to transfer appreciating assets to heirs at a reduced gift tax value. You transfer assets to the trust, receive annuity payments for a term (typically 2-10 years), and remaining assets pass to beneficiaries. If assets appreciate above the IRS assumed rate (Section 7520 rate), the excess passes to heirs tax-free.

**Example:** Transfer $10M in stock to a 5-year GRAT. You receive $2.2M/year (total $11M). Stock grows to $20M. Heirs receive $9M estate-tax-free ($20M - $11M annuity).

4. Family Limited Partnership (FLP)

FLPs allow you to transfer assets to family members at discounted values due to lack of control and marketability. You contribute assets (real estate, business interests) to the partnership, retain general partner control, and gift limited partnership interests to heirs at 20-40% valuation discounts.

5. Qualified Personal Residence Trust (QPRT)

A QPRT allows you to transfer your home to heirs at a reduced gift tax value while continuing to live there for a specified term. After the term, the home passes to beneficiaries. If you outlive the term, the home is removed from your estate. You can continue living there by paying fair market rent to the new owners (further reducing your estate).

What Assets Are Included in the Taxable Estate?

The taxable estate includes virtually everything you own at death:

• Real estate: Primary residence, vacation homes, rental properties, land
• Financial accounts: Bank accounts, brokerage accounts, money market funds
• Investments: Stocks, bonds, mutual funds, hedge funds, private equity
• Retirement accounts: 401(k), IRA, pension benefits (consider our 401(k) Calculator and IRA Calculator)
• Business interests: Sole proprietorships, partnerships, S-corp/C-corp stock
• Life insurance: Death benefits from policies you own
• Personal property: Vehicles, jewelry, art, collectibles, furniture
• Digital assets: Cryptocurrency, domain names, online businesses
• Receivables: Notes owed to you, trust interests, annuities

Estate Tax vs. Inheritance Tax

It's important to distinguish between estate tax and inheritance tax:

When to File Estate Tax Returns

You must file federal Form 706 if the gross estate exceeds $13.61 million in 2024. The return is due 9 months after death, with a possible 6-month extension. Key filing considerations:

• Elect portability: File even if no tax owed to transfer unused exemption to spouse
• Special valuation: File if using alternate valuation date or special use valuation
• State returns: Separate state estate tax returns may be required with different deadlines
• Generation-skipping tax: Additional Form 706-GS may be required
• Penalties: Late filing incurs 5% penalty per month (up to 25%) plus interest

Estate Planning for Different Net Worth Levels

$2-5 Million (State Estate Tax Exposure)

If you live in a state with low exemptions (MA, OR, MN, RI), focus on basic strategies: maximize annual gifting, use marital deduction, consider ILIT for life insurance, and potentially relocate to a no-estate-tax state. Our Retirement Calculator can help assess if relocating makes financial sense.

$5-15 Million (Near Federal Exemption)

With the exemption scheduled to drop after 2025, consider "use it or lose it" gifting now. Strategies: maximize lifetime gifts, establish ILITs, create GRATs for appreciating assets, and consider charitable remainder trusts. Track with our Investment Calculator to project future estate growth.

$15-50 Million (Significant Tax Exposure)

Aggressive planning essential. Implement: FLPs for valuation discounts, multiple GRATs, intentionally defective grantor trusts (IDGTs), private foundations or donor-advised funds, and sophisticated life insurance planning. Annual planning reviews critical.

$50 Million+ (Ultra-High Net Worth)

Comprehensive multi-generational planning required. Strategies: dynasty trusts for multiple generations, private placement life insurance, offshore trusts (with caution), family offices for coordinated planning, and charitable foundations for legacy and tax benefits. Work with team of estate attorney, CPA, and wealth advisor.

Common Estate Planning Mistakes

Using This Estate Tax Calculator

Our estate tax calculator provides comprehensive analysis of your federal and state estate tax liability. Key features:

• Itemized assets: Break down estate by category or enter total value
• Automatic calculations: Federal and state tax computed using actual tax tables
• Deductions: Marital, charitable, debts, and funeral expenses automatically applied
• Portability: Factor in deceased spouse's unused exemption
• Tax strategies: Personalized recommendations with savings estimates
• What-if scenarios: Test impact of charitable giving, lifetime gifts, etc.

For related calculations, explore our Capital Gains Tax Calculator for investment tax planning and Property Tax Calculator for real estate tax estimates.