Estate Tax Calculator Explained

The tax that almost nobody owes — and the math that decides who does

The US federal estate tax is the tax on the transfer of property at death. For decedents dying in 2026 it kicks in only once the combined value of the taxable estate and lifetime taxable gifts exceeds $15,000,000 per individual, set permanently by the One Big Beautiful Bill Act (Public Law 119-21, July 2025). Above that line, every additional dollar is taxed at a flat 40%. The estate tax calculator walks the Form 706 arithmetic in a single screen using the 2026 statutory values. This article is the long version: what counts as the estate, what comes off as deductions, how prior gifts roll back into the calculation, and the situations that turn a return of zero owed into a real liability.

What the federal estate tax is, in one paragraph

The estate tax is governed by Chapter 11 of the Internal Revenue Code (§§2001–2210) and reported on IRS Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return. The executor of the estate adds up everything the decedent owned at fair market value, subtracts allowed deductions, adds back lifetime taxable gifts, applies the unified credit equivalent to the basic exclusion amount, and pays 40% on anything left. Roughly 0.1% of US deaths produce a taxable estate at the current exemption level — about 4,000 returns owing tax out of more than three million decedents per year, per IRS Statistics of Income. The estate tax calculator estimates whether your situation lands in that tiny slice and how large the bill would be if it does.

The 2026 statutory values

Three numbers do all the work:

• Basic exclusion amount: $15,000,000. Set by §70106 of the One Big Beautiful Bill Act, replacing the scheduled sunset that would have dropped the 2026 figure to roughly $7,000,000 when the 2017 Tax Cuts and Jobs Act provisions expired. Indexed for inflation in $10,000 increments starting in 2027.
• Top marginal rate: 40%. The IRC §2001(c) rate schedule is graduated from 18% on the first $10,000 of taxable transfer to 40% above $1,000,000. Every lower bracket sits below the $15M exemption, so the unified credit absorbs all of them. In practice the only rate that matters is the 40% top rate.
• Annual gift exclusion: $19,000 per recipient (2026). Gifts at or below this amount per donor, per donee, per year do not touch the lifetime exemption and never need to be reported on Form 709. Only gifts above this threshold count as “taxable gifts” that erode the lifetime exclusion.

Plug these into the estate tax calculator and the single equation is:

Tax = max(0, (Gross estate − Deductions + Prior taxable gifts) − $15,000,000) × 40%

What goes in the gross estate

Form 706 builds the gross estate from nine asset schedules (A through I). The headline categories:

Real estate (Schedule A)

Every parcel of land and every building, valued at fair market value at the date of death (or, by election, six months later under the §2032 alternate valuation date). Comparable sales typically anchor the appraisal. Mortgages on the property are deducted separately on Schedule K rather than netted out of the gross figure, which matters because portability and other elections key off the gross number.

Stocks and bonds (Schedule B)

Publicly traded securities are valued at the mean of the high and low prices on the date of death. Bonds use accrued interest plus the published market price. Closely held stock requires a formal business valuation, often the largest single source of dispute on a Form 706.

Cash and notes (Schedule C)

Checking, savings, money-market, and certificate-of-deposit balances on the date of death; promissory notes owed to the decedent at their principal-plus-accrued-interest value.

Life insurance (Schedule D)

Proceeds are included if the decedent held any “incident of ownership” in the policy — the right to change the beneficiary, borrow against it, or surrender it for cash value. A common planning move is to push life insurance into an irrevocable life insurance trust (ILIT) set up at least three years before death, which removes the death benefit from the gross estate entirely.

Jointly held property (Schedule E)

Tenancy-by-the-entirety or joint-tenancy-with-rights-of-survivorship property between spouses is included at 50%. With non-spouse joint tenants, the entire value is included unless the surviving tenant can prove they contributed their share of the original purchase price.

Other miscellaneous property (Schedule F)

Business interests, partnership stakes, retirement accounts (the full IRA and 401(k) balance counts at death), brokerage margin balances, collectibles, art, vehicles, intellectual property, unpaid wages, and crypto holdings. Personal property like household contents is typically appraised in aggregate unless individual items exceed $3,000.

Lifetime transfers (Schedule G)

Three categories of transfers made during life are pulled back into the estate: transfers with retained life interest under §2036, revocable transfers under §2038, and gifts within three years of death of any interest in life insurance or any transfer that would have been included under §§2036–2038. The three-year rule prevents deathbed transfers from escaping the estate tax.

Powers of appointment (Schedule H) and annuities (Schedule I)

A general power of appointment over trust assets brings those assets into the estate even if the decedent never exercised the power. Annuities, both commercial and pension-based, are included to the extent of any death benefit payable to a beneficiary.

What comes off as deductions

The taxable estate is the gross estate minus the §§2053–2058 deduction stack:

• Funeral and administration expenses (§2053). Funeral costs, executor fees, attorney fees, accounting fees, and court costs.
• Debts of the decedent (§2053). Mortgages, unpaid income tax, credit card balances, medical bills outstanding at death.
• Casualty losses during administration (§2054). Uninsured losses on estate assets while the estate is being settled.
• Charitable bequests (§2055). Unlimited deduction for transfers to qualified 501(c)(3) organisations.
• Marital deduction (§2056). Unlimited deduction for transfers to a surviving spouse who is a US citizen. Non-citizen spouses get a smaller deduction unless the transfer is made through a qualified domestic trust (QDOT) under §2056A.
• State death tax deduction (§2058). A deduction (not a credit, since 2005) for state estate or inheritance taxes actually paid.

The marital deduction is the single biggest planning lever. Pushing the entire estate to the surviving spouse defers all federal estate tax to the second death, which is when the family decides whether to use one exemption or both via portability.

Worked example: $20M estate

Consider a single decedent in 2026 with:

• Primary residence: $3,000,000
• Brokerage and retirement accounts: $11,000,000
• Closely held business interest: $5,000,000
• Personal property and life insurance proceeds: $1,000,000
• Outstanding mortgage on the residence: $500,000
• Funeral and administration expenses: $200,000
• Final charitable bequest to a 501(c)(3): $800,000
• No lifetime taxable gifts above the annual exclusion

Run those through the estate tax calculator:

1. Gross estate = 3,000,000 + 11,000,000 + 5,000,000 + 1,000,000 = $20,000,000.
2. Total deductions = 500,000 (mortgage) + 200,000 (admin) + 800,000 (charity) = $1,500,000.
3. Taxable estate = 20,000,000 − 1,500,000 = $18,500,000.
4. Combined transfer = 18,500,000 + 0 (no prior gifts) = $18,500,000.
5. Amount above the $15,000,000 exemption = $3,500,000.
6. Federal estate tax = 3,500,000 × 40% = $1,400,000.
7. Effective rate on the gross estate = 1,400,000 / 20,000,000 = 7.0%.

Change the charitable bequest to $4,000,000 — a move planners make to walk the taxable amount down to the exemption line — and the federal estate tax drops to zero. The family chose to send $4M to a charity rather than $1.4M to the Treasury.

Prior lifetime gifts and the unified credit

The federal estate and gift taxes are a single unified system. Any gift made during life above the annual exclusion ($19,000 per recipient in 2026) is a “taxable gift” that does not usually generate immediate tax — instead it eats into your $15M lifetime exclusion. At death, the estate tax computation on Form 706 Part 2 adds back all such prior taxable gifts to the taxable estate, applies the full $15M exemption to the combined total, and computes the tax on the excess.

The arithmetic is set up this way so that the unified credit cannot be double-counted. Suppose a decedent made $5,000,000 of taxable gifts during life (using up $5,000,000 of the lifetime exemption) and dies with a $13,000,000 taxable estate. The combined transfer is $18,000,000; the amount over the $15M exemption is $3,000,000; the tax is $1,200,000. The estate tax calculator handles this by asking for prior taxable gifts as a separate input.

The clawback question — what happens to gifts made during the higher TCJA exemption years if the exemption later drops — was settled by IRS regulations finalised in 2019 (T.D. 9884) and made moot for now by OBBBA, which made the $15M floor permanent. Gifts made under any prior higher exemption are not retroactively taxed.

Portability: how married couples double the exemption

Portability, enacted in 2010 and made permanent in 2013, lets a surviving spouse use the deceased spouse's unused exclusion amount (DSUE). For a 2026 couple, this means up to $30,000,000 can pass to heirs free of federal estate tax across two deaths.

The catch: portability is not automatic. The executor of the first spouse's estate must file Form 706 within nine months of death (with one automatic six-month extension on Form 4768), even if no tax is owed and the estate falls below the filing threshold. Revenue Procedure 2022-32 extended the late-portability election window to five years after death for estates that had no other filing requirement, which has saved many families that missed the original deadline.

Worked numbers: spouse A dies in 2026 leaving the entire $10M estate to spouse B. The marital deduction zeroes out the tax. The full $15M exemption is unused; the executor files Form 706 and elects to port the DSUE. Spouse B now has $30M of total exemption ($15M own + $15M DSUE). Spouse B dies in 2031 with a $28M estate (assuming some growth). The combined exemption covers it; the estate tax is zero. Without the portability election, spouse B would owe 40% × ($28M − $15M − inflation adjustments) — easily $4M+ of avoidable tax.

State estate and inheritance taxes

The federal estate tax is the headline number, but state-level taxes often bite at much lower thresholds. As of 2026:

States with their own estate tax (12 plus DC)

• $1M exemption: Oregon.
• $2M exemption: Massachusetts.
• $3M exemption: Minnesota, Washington.
• $5–7M range: Illinois, Maine, Rhode Island, Vermont, Connecticut, District of Columbia.
• Indexed to federal: Hawaii, Maryland, New York (with a steep cliff if the estate exceeds the exemption by more than 5%).

Top state estate tax rates run from 12% (most states) to 20% (Hawaii, Washington), stacked on top of the federal 40% on the same dollars (the federal deduction in §2058 partly mitigates the doubling).

States with an inheritance tax (6)

Iowa (phasing out by 2025), Kentucky, Maryland (which has both), Nebraska, New Jersey, and Pennsylvania levy tax on the beneficiary rather than the estate, with rates depending on the heir's relationship to the decedent. Spouses and lineal descendants are usually exempt or face the lowest rate; siblings face higher rates; unrelated beneficiaries face the highest. The federal estate tax calculator covers only the federal layer; check your state department of revenue for the local rules.

Generation-skipping transfer tax (GST)

The §2601 generation-skipping transfer tax is a separate 40% tax on transfers to anyone two or more generations below the donor — typically grandchildren — and exists to prevent multi-generation trusts from skipping an entire layer of estate tax. The GST exemption matches the basic exclusion at $15M in 2026, but it must be affirmatively allocated to specific transfers on Schedule R or Form 709. Sloppy allocation triggers 40% tax decades later with no remaining exemption.

The hard cases

Closely held business interests

Valuing private company stock is half art, half litigation. The IRS and the estate routinely disagree by tens of millions on the same business. Section 6166 lets an estate pay estate tax attributable to a closely held business interest over up to fifteen years at favourable interest rates, which can prevent a forced sale of the business to meet a nine-month payment deadline.

Illiquid estates

The federal estate tax is due in cash, nine months from the date of death (Form 4768 buys a one-year extension to pay for cause). Estates heavy in real estate, art, or private companies may have to borrow, sell distressed assets, or invoke §6166 instalment treatment. Life insurance held in an ILIT is the classic answer — the death benefit sits outside the estate and provides immediate liquidity to pay the tax.

Non-citizen spouses

The unlimited marital deduction requires the surviving spouse to be a US citizen. A non-citizen surviving spouse can still defer tax by receiving the marital share through a qualified domestic trust (QDOT) under §2056A, which keeps the assets in a US trustee's hands and taxes distributions of principal as if they were part of the first spouse's estate.

Common mistakes

• Not filing Form 706 to elect portability. By far the most common avoidable mistake at the $5M–$15M estate range. The form is paperwork-heavy but the option to use the deceased spouse's exemption is worth seven figures.
• Putting life insurance in the wrong owner's name. If the decedent owns the policy, the death benefit is in the estate at full value. Transferring to an ILIT three years before death (or having the ILIT own the policy from inception) keeps it out.
• Forgetting retirement accounts count at full value. A $5M IRA is $5M in the gross estate. The beneficiary also pays income tax as distributions come out — a classic double whammy.
• Treating the calculator as a substitute for filing. The estate tax calculator gives a planning estimate. An actual return needs a CPA or estate attorney, formal appraisals, and the full Form 706 schedules.
• Ignoring state taxes. A Massachusetts estate of $3M owes no federal tax but plenty of state tax. A Florida estate of $20M owes federal but no state tax. Where the decedent was domiciled matters as much as how much they owned.

When to seek professional advice

Anyone with a gross estate above roughly $10M, anyone with a closely held business or out-of-state real estate, anyone with a non-citizen spouse, and any executor of an estate large enough to consider electing portability — these are all cases where the savings from one hour with a competent estate attorney pay back many times over. The estate tax calculator is accurate for the simple cases, but the federal estate tax has more elections, special rules, and timing traps than almost any other chapter of the Code.

Related calculators

• Capital Gains Tax Calculator — step-up in basis at death erases unrealised capital gains, which is why many estate plans deliberately hold appreciated assets until death.
• AGI Calculator — the executor still files a final Form 1040 for the year of death.
• Alternative Minimum Tax Calculator — relevant for high-income individuals during life, when the bulk of estate planning happens.
• House Affordability Calculator — primary residence often the largest single asset on Schedule A.
• Dividend Tax Calculator — dividend income during life builds the brokerage balance that becomes Schedule B.
• Investment Calculator — project long-term portfolio growth that drives the size of the eventual estate.