Inheritance Tax Calculator
Estimate inheritance or estate tax by state based on beneficiary relationship and amount. Enter values for instant results with step-by-step formulas.
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The taxable estate is the gross estate minus debts, expenses, charitable bequests, and spousal transfers. Federal estate tax applies progressive rates up to 40% on amounts exceeding the $13.61M exemption. State inheritance taxes vary by state and beneficiary relationship.
Last reviewed: January 2026
Worked Examples
Example 1: Estate Above Federal Exemption
Example 2: Estate Below Federal Exemption With State Tax
Background & Theory
The Inheritance Tax Calculator applies the following established principles and formulas. Finance and investing rest on the foundational concept of the time value of money: a dollar received today is worth more than a dollar received in the future, because present funds can be deployed to earn a return. This principle underlies virtually every valuation technique in modern finance. The future value of a present sum P growing at rate r over n periods is expressed as FV = P(1 + r)^n, while the present value of a future cash flow FV is PV = FV / (1 + r)^n. Compound growth amplifies returns significantly over long horizons, a dynamic often described as the eighth wonder of the world. Net Present Value (NPV) extends these mechanics to evaluate investment projects by summing the present values of all expected cash flows minus the initial outlay: NPV = sum[CF_t / (1 + r)^t] - C_0. A positive NPV indicates the project creates value above the required return. The Internal Rate of Return (IRR) is the discount rate that sets NPV to zero, providing a single percentage benchmark for project comparison. The risk-return tradeoff is the central tension of investment theory. Higher expected returns generally require accepting greater uncertainty. Harry Markowitz formalized this in Modern Portfolio Theory by demonstrating that portfolio variance can be reduced through diversification when assets are imperfectly correlated. The efficient frontier represents the set of portfolios offering the maximum return for a given level of risk. The Capital Asset Pricing Model (CAPM) extends this by introducing the market portfolio as a reference, defining expected return as E(r) = r_f + beta * (E(r_m) - r_f), where beta measures an asset's sensitivity to systematic market risk. Asset classes — equities, fixed income, real assets, and alternatives — differ in their return profiles, liquidity, and correlations. Strategic asset allocation determines long-run target weights based on investor objectives and risk tolerance, while tactical allocation permits short-run deviations to exploit perceived mispricings. Discount rates used in valuation models must reflect the cost of capital appropriate to the risk of the cash flows being discounted, a point stressed in corporate finance texts from Brealey, Myers, and Allen through to Damodaran.
History
The history behind the Inheritance Tax Calculator traces back through the following developments. The formal practice of lending at interest dates to ancient Mesopotamia, where the Code of Hammurabi around 1750 BCE regulated interest rates on grain and silver loans. Banking as an institutional activity took root in medieval Italy, with merchant bankers in Florence and Venice financing trade across Europe through instruments such as bills of exchange. The Medici family operated one of the most sophisticated banking networks of the fifteenth century, pioneering double-entry bookkeeping and correspondent banking relationships. Organized equity markets emerged in the early seventeenth century. The Dutch East India Company (VOC), chartered in 1602, issued shares to the public and created the Amsterdam Stock Exchange — widely regarded as the world's first formal stock exchange. The VOC allowed investors to buy and sell shares freely, establishing the template for the joint-stock company. The period also produced the Dutch tulip mania of 1636 to 1637, one of history's first recorded speculative bubbles, in which tulip bulb futures contracts reached extraordinary prices before collapsing. England's financial revolution followed in the late seventeenth century with the founding of the Bank of England in 1694 and the development of government bond markets. The South Sea Bubble of 1720 illustrated the dangers of speculative excess and contributed to early securities regulation. Throughout the eighteenth and nineteenth centuries, industrialization created enormous demand for capital, fueling the expansion of stock exchanges in London, Paris, New York, and beyond. The New York Stock Exchange, formalized in 1817, became the world's dominant equities market by the twentieth century. The Great Crash of 1929 and subsequent Great Depression prompted the US Securities Act of 1933 and Securities Exchange Act of 1934, establishing the SEC and mandatory disclosure requirements. Harry Markowitz published his landmark portfolio selection paper in 1952, launching quantitative finance. The CAPM emerged in the 1960s through work by Sharpe, Lintner, and Mossin. John Bogle launched the first retail index fund in 1976, democratizing diversified investing and challenging active management orthodoxy.
Frequently Asked Questions
Formula
Estate Tax = Tax Rate x (Taxable Estate - Exemption)
The taxable estate is the gross estate minus debts, expenses, charitable bequests, and spousal transfers. Federal estate tax applies progressive rates up to 40% on amounts exceeding the $13.61M exemption. State inheritance taxes vary by state and beneficiary relationship.
Worked Examples
Example 1: Estate Above Federal Exemption
Problem: An estate is valued at $15 million with $200,000 in debts and expenses. No charitable bequests or spousal inheritance. Calculate federal estate tax.
Solution: Gross estate: $15,000,000\nLess debts: -$200,000\nTaxable estate: $14,800,000\nFederal exemption: $13,610,000\nAmount subject to tax: $14,800,000 - $13,610,000 = $1,190,000\nFederal estate tax at 40% marginal rate: ~$440,800\nNet to heirs: $14,800,000 - $440,800 = $14,359,200
Result: Federal estate tax: ~$440,800 | Net inheritance: $14,359,200 | Effective rate: 3.0%
Example 2: Estate Below Federal Exemption With State Tax
Problem: A $5 million estate in Maryland with $100,000 in debts. Beneficiary is an adult child. Maryland has a $5 million estate tax exemption and 10% inheritance tax.
Solution: Taxable estate: $5,000,000 - $100,000 = $4,900,000\nFederal: Below $13.61M exemption = $0 federal tax\nMaryland estate tax: Below $5M exemption = $0\nMaryland inheritance tax: Children are exempt from inheritance tax in Maryland\nTotal tax: $0\nNet inheritance: $4,900,000
Result: Federal tax: $0 | State tax: $0 | Full $4,900,000 passes to child tax-free
Frequently Asked Questions
What is the difference between estate tax and inheritance tax?
Estate tax and inheritance tax are both transfer taxes on wealth passed at death, but they apply differently. The federal estate tax is levied on the estate itself before assets are distributed to heirs. It is paid from the estate funds and is based on the total value of the estate above the exemption amount. Inheritance tax, by contrast, is imposed by certain states on the beneficiaries who receive the assets, and the tax rate often varies based on the relationship between the deceased and the beneficiary. Spouses are almost always exempt from inheritance tax, children often receive favorable rates or exemptions, and unrelated beneficiaries typically face the highest rates. Currently six states impose inheritance taxes.
What is the current federal estate tax exemption?
The federal estate tax exemption for 2024 is $13.61 million per individual, meaning estates valued below this threshold owe no federal estate tax. Married couples can effectively shelter up to $27.22 million using portability, which allows a surviving spouse to use any unused exemption from a deceased spouse. This exemption amount is historically high due to the Tax Cuts and Jobs Act of 2017, which roughly doubled it. However, this provision is set to sunset after 2025, potentially reducing the exemption to approximately $7 million (adjusted for inflation). Estate planning professionals recommend that individuals with estates potentially affected by this change consult with advisors before the sunset date to implement strategies that maximize tax savings.
Which states have an inheritance tax or estate tax?
As of 2024, six states impose an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is unique in imposing both an estate tax and an inheritance tax. Additionally, twelve states and the District of Columbia impose their own estate tax with exemptions that are often much lower than the federal exemption. States with estate taxes include Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. State exemptions range from about $1 million in Massachusetts and Oregon to over $9 million in Connecticut and New York. Residents of these states may owe state death taxes even when their estates fall below the federal exemption threshold.
How can I reduce my estate tax liability through planning?
Several estate planning strategies can significantly reduce estate and inheritance tax liability. Annual gift exclusions allow you to give up to $18,000 per person per year (2024) without using your lifetime exemption. Irrevocable life insurance trusts (ILITs) remove life insurance proceeds from your taxable estate. Grantor retained annuity trusts (GRATs) transfer asset appreciation to heirs with minimal gift tax. Charitable remainder trusts provide income during life and donate the remainder to charity, removing assets from the estate. Family limited partnerships can discount the value of transferred business interests. Spousal lifetime access trusts (SLATs) allow married couples to use their exemptions while maintaining some access to funds. Consulting an estate planning attorney is essential for implementing these strategies properly.
Do I need to file an estate tax return even if no tax is owed?
Filing a federal estate tax return (Form 706) is only required when the gross estate plus adjusted taxable gifts exceeds the filing threshold of $13.61 million for 2024 deaths. However, there are important reasons to file even when no tax is owed. Filing is mandatory to elect portability of the unused exemption to a surviving spouse, which could save millions in future estate taxes. Some states have lower filing thresholds for their own estate tax. The return is also needed to establish the date-of-death values for the stepped-up basis of inherited assets, which helps beneficiaries calculate capital gains if they later sell. The filing deadline is 9 months after death with an automatic 6-month extension available. Estate tax returns can be complex and typically require professional preparation.
How accurate are the results from Inheritance Tax Calculator?
All calculations use established mathematical formulas and are performed with high-precision arithmetic. Results are accurate to the precision shown. For critical decisions in finance, medicine, or engineering, always verify results with a qualified professional.
References
Reviewed by Sahil, Senior Finance & Tax Editor · Editorial policy