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 for accuracy by Sahil, Senior Finance & Tax Editor
Inheritance Tax Calculator
Calculator
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Formula: Estate Tax = Tax Rate x (Taxable Estate - Exemption)
Worked example — Federal estate tax: ~$440,800 | Net inheritance: $14,359,200 | Effective rate: 3.0%
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 Less debts: -$200,000 Taxable estate: $14,800,000 Federal exemption: $13,610,000 Amount subject to tax: $14,800,000 - $13,610,000 = $1,190,000 Federal estate tax at 40% marginal rate: ~$440,800 Net 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 Federal: Below $13.61M exemption = $0 federal tax Maryland estate tax: Below $5M exemption = $0 Maryland inheritance tax: Children are exempt from inheritance tax in Maryland Total tax: $0 Net 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 does the unlimited marital deduction work?
The unlimited marital deduction allows a deceased spouse to transfer any amount of assets to a surviving spouse completely free of federal estate tax, regardless of the estate size. This deduction effectively defers estate tax until the surviving spouse dies and passes the combined assets to the next generation. Both spouses must be U.S. citizens for the unlimited deduction to apply; for non-citizen spouses, a Qualified Domestic Trust (QDOT) must be used to qualify for the marital deduction. While the marital deduction eliminates tax at the first death, proper estate planning should also consider the second death. Without planning, the surviving spouse estate could face a substantial tax bill when passing assets to children or other heirs.
What assets are included in the taxable estate?
The taxable estate includes virtually all assets owned at death or in which the deceased had an interest. This encompasses real estate, bank accounts, investment portfolios, retirement accounts such as IRAs and 401k plans, business interests, life insurance policies owned by the deceased, vehicles, personal property, and collectibles. Life insurance proceeds are included if the deceased owned the policy or had incidents of ownership within three years of death. Assets in revocable living trusts are included because the grantor maintained control. Assets transferred to irrevocable trusts more than three years before death are generally excluded. Jointly owned property is partially or fully included depending on the type of ownership and contribution history.
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.
What is portability and how does it affect married couples?
Portability allows a surviving spouse to use any unused portion of a deceased spouse estate tax exemption in addition to their own. For example, if the first spouse dies with a $5 million estate and has a $13.61 million exemption, the unused $8.61 million can transfer to the surviving spouse, giving them a combined exemption of $22.22 million. To claim portability, the executor must file a federal estate tax return (Form 706) within 9 months of death (plus extensions), even if no tax is owed. Portability only applies to the federal estate tax exemption and does not apply to the generation-skipping transfer tax exemption. Some states do not recognize portability for their state estate tax, making trusts still necessary for state-level planning.
How are inherited retirement accounts taxed?
Inherited retirement accounts like traditional IRAs and 401k plans are subject to income tax when distributions are taken by beneficiaries, not estate tax (unless the overall estate exceeds the exemption). Under the SECURE Act of 2019, most non-spouse beneficiaries must withdraw the entire inherited IRA balance within 10 years of the original owner death. Spouse beneficiaries can roll the inherited account into their own IRA and follow standard distribution rules. Eligible designated beneficiaries including minor children, disabled individuals, and those within 10 years of the decedent age can still stretch distributions over their life expectancy. Roth IRA inheritances must also be distributed within 10 years but withdrawals are generally tax-free since contributions were made with after-tax dollars.
What is the stepped-up basis rule and why is it important?
The stepped-up basis rule adjusts the cost basis of inherited assets to their fair market value on the date of the owner death, effectively eliminating capital gains tax on appreciation that occurred during the decedent lifetime. For example, if someone purchased stock for $50,000 and it was worth $500,000 at death, the heir receives a stepped-up basis of $500,000. If the heir sells immediately, they owe zero capital gains tax on the $450,000 in appreciation. This rule applies to most inherited assets including real estate, stocks, and business interests. It is one of the most valuable tax benefits in estate planning and is a key reason why holding appreciated assets until death can be more tax-efficient than selling or gifting them during life.
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.
References
Reviewed for accuracy by Sahil, Senior Finance & Tax Editor · Editorial policy
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