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.
Reviewed by Sahil, Senior Finance & Tax Editor
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.
References
Reviewed by Sahil, Senior Finance & Tax Editor · Editorial policy