Inheritance Tax Calculator
Federal estate tax + state inheritance tax · Exemptions, relationship-based rates, and minimization strategies
Last verified March 2026 · Reflects 2025 federal estate tax exemption of $13.61M
Reading time: approximately 28 minutes
Inheritance Tax Calculator
I've designed this calculator to handle both the federal estate tax and state-level inheritance taxes. These are two separate systems that often get confused. Enter the estate value, your state, and your relationship to the deceased to see a complete tax picture. It won't take more than a minute, and the results might surprise you.
Estate Tax vs Inheritance Tax
This is the first point of confusion for most people, and I can't blame them. The terms "estate tax" and "inheritance tax" are often used interchangeably, but they're fundamentally different taxes paid by different people.
The estate tax is a federal tax on the total value of a deceased person's estate before it's distributed to beneficiaries. It's paid by the estate itself, not the heirs. The current federal exemption is $13.61 million per individual ($27.22 million for married couples using portability). Only estates exceeding this threshold owe federal estate tax. According to Wikipedia's estate tax overview, fewer than 0.1% of estates are large enough to trigger federal estate tax.
The inheritance tax, by contrast, is a state-level tax paid by the person receiving the inheritance. Only six states currently impose inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. The rate typically depends on the beneficiary's relationship to the deceased. Spouses are almost always exempt, children usually face lower rates, and unrelated beneficiaries can face rates up to 18%.
Maryland is unique in that it imposes both a state estate tax and a state inheritance tax. If you're dealing with a Maryland estate, the calculations become more complex, which is exactly why I built this tool to handle that scenario automatically.
Federal Estate Tax Brackets
The federal estate tax uses a progressive bracket system similar to income tax, but the rates are considerably higher. The brackets range from 18% to 40%, though in practice the effective rate is always lower due to the unified credit that eliminates tax on the first $13.61 million.
2025 Federal Estate Tax Brackets
| Taxable Amount Over Exemption | Tax Rate | Tax on $20M Estate |
|---|---|---|
| $0 to $10,000 | 18% | $1,800 |
| $10,001 to $20,000 | 20% | $2,000 |
| $20,001 to $40,000 | 22% | $4,400 |
| $40,001 to $60,000 | 24% | $4,800 |
| $60,001 to $80,000 | 26% | $5,200 |
| $80,001 to $100,000 | 28% | $5,600 |
| $100,001 to $150,000 | 30% | $15,000 |
| $150,001 to $250,000 | 32% | $32,000 |
| $250,001 to $500,000 | 34% | $85,000 |
| $500,001 to $750,000 | 37% | $92,500 |
| $750,001 to $1,000,000 | 39% | $97,500 |
| Over $1,000,000 | 40% | Remaining at 40% |
In practice, the unified credit effectively zeroes out the tax on the first $13.61 million, so the marginal rate for most taxable estates starts effectively at 40% on the amount above the exemption. The lower brackets technically exist in the statute, but the credit absorbs all tax owed on amounts below the exemption. For estates just above the exemption, the effective rate on the total estate is quite low. For a $15 million estate, only $1.39 million is subject to tax.
State Inheritance Tax Overview
Only six states levy an inheritance tax, and each has its own rules, exemptions, and rate structures. If you don't live in one of these states and the deceased didn't live there, state inheritance tax likely doesn't apply to you. However, some states may tax inheritances from residents of their state regardless of where the beneficiary lives.
State Inheritance Tax Summary (2025)
| State | Spouse Rate | Child Rate | Sibling Rate | Other Rate |
|---|---|---|---|---|
| Iowa | Exempt | Exempt (2025+) | Exempt (2025+) | Exempt (2025+) |
| Kentucky | Exempt | Exempt | 4% to 16% | 6% to 16% |
| Maryland | Exempt | Exempt | 10% | 10% |
| Nebraska | Exempt | 1% (over $100K) | 11% (over $40K) | 15% (over $25K) |
| New Jersey | Exempt | Exempt | 11% to 16% | 15% to 16% |
| Pennsylvania | Exempt | 4.5% | 12% | 15% |
A few important notes: Iowa phased out its inheritance tax entirely as of January 1, 2025, so it effectively no longer applies for deaths occurring in 2025 and later. Maryland is the only state that levies both an estate tax and an inheritance tax. New Jersey eliminated its estate tax in 2018 but retained its inheritance tax. These distinctions matter when you're planning ahead.
I've tracked discussions about these state-level variations on Hacker News, where tech professionals frequently discuss estate planning for concentrated stock positions. The intersection of state tax policy and wealth transfer planning is more relevant than ever as the federal exemption approaches its sunset date.
Rates by Relationship to Deceased
The relationship between the beneficiary and the deceased is the primary factor determining state inheritance tax rates. The logic behind this is straightforward: the tax system assumes that transfers to close family members (spouses and children) deserve preferential treatment, while transfers to more distant relatives or non-relatives face higher rates.
Surviving spouses are universally exempt from inheritance tax in all six states. This aligns with the federal unlimited marital deduction, which allows any amount to pass tax-free between spouses. Children and grandchildren (lineal descendants) receive favorable treatment in most states, with Pennsylvania being the most notable exception at a 4.5% rate on all inheritances by children.
Siblings, nieces, nephews, and unrelated beneficiaries face the highest rates. In New Jersey, an unrelated beneficiary can face rates up to 16% on amounts over $700,000. In Pennsylvania, the rate is 15% for non-lineal heirs. If you're planning a bequest to someone who isn't a close family member, these rates can substantially reduce the amount they actually receive.
Pennsylvania Example: $500,000 Inheritance
| Beneficiary | Rate | Tax Owed | Net Received |
|---|---|---|---|
| Surviving Spouse | 0% | $0 | $500,000 |
| Child | 4.5% | $22,500 | $477,500 |
| Sibling | 12% | $60,000 | $440,000 |
| Friend / Nephew | 15% | $75,000 | $425,000 |
Strategies to reduce Estate Taxes
Estate planning isn't just for the ultra-wealthy. While the $13.61 million federal exemption means most families won't owe federal estate tax, the exemption is scheduled to drop roughly in half after 2025, and state-level inheritance taxes can apply to much smaller estates. Here are the most effective strategies I've encountered.
Annual Gift Tax Exclusion
You can gift up to $18,000 per recipient per year (2024) without using any of your lifetime exemption. A married couple can give $36,000 per person per year. Over time, this systematically reduces the taxable estate. If you have three children and six grandchildren, a married couple can transfer $324,000 per year completely tax-free. Over a decade, that's $3.24 million removed from the estate.
Irrevocable Life Insurance Trust (ILIT)
Life insurance proceeds are generally income tax-free to beneficiaries, but they're included in the taxable estate if the deceased owned the policy. An ILIT removes the policy from the estate entirely. The trust owns the policy, you fund it with annual gifts, and the proceeds flow to beneficiaries outside the estate. For large estates, this can save millions in estate tax.
Charitable Remainder Trust (CRT)
A CRT provides income to you during your lifetime, then passes the remainder to charity at death. The charitable portion is deducted from the taxable estate. You can also get an income tax deduction for the present value of the future charitable gift. This is particularly useful for highly appreciated assets where selling would trigger massive capital gains.
Spousal Portability Election
When the first spouse dies, the executor can elect to transfer any unused exemption to the surviving spouse. This means a married couple effectively has a $27.22 million combined exemption. However, you must file a federal estate tax return (Form 706) even if no tax is owed to preserve the portability election. I've seen families lose millions in future tax savings because they didn't file this return.
For technical implementations of estate planning calculations, several libraries on npm provide calculation frameworks. The Stack Overflow tax tag also has useful discussions on implementing progressive tax bracket logic programmatically.
The 2026 Exemption Sunset
Critical Planning Deadline Ahead
The current $13.61 million federal estate tax exemption is set to sunset after December 31, 2025, reverting to approximately $7 million (adjusted for inflation). This represents a reduction of roughly $6.5 million per person in tax-free transfer capacity. If you haven't reviewed your estate plan in light of this change, the time to act is now.
The Tax Cuts and Jobs Act of 2017 temporarily doubled the exemption, but that doubling expires at the end of 2025 unless Congress acts to extend it. As of March 2026, this deadline has passed and the new exemption amount applies. Estates that were previously below the threshold may now face federal estate tax liability.
This sunset provision is one of the most significant changes in estate tax law in decades. For families with estates between $7 million and $13.61 million, it could mean the difference between owing zero federal estate tax and owing hundreds of thousands or even millions. Estate planning attorneys across the country have been urging clients to take action. The original research and analysis on this topic consistently shows that proactive planning before exemption reductions can save families substantial amounts.
Our Testing Methodology
I've built this calculator using data directly from IRS Revenue Procedure publications for federal estate tax brackets and the unified credit. State inheritance tax rates and exemptions are sourced from each state's department of revenue and cross-referenced with the Tax Foundation's annual reports.
The federal estate tax calculation applies the full progressive bracket schedule and then subtracts the unified credit (equivalent to the tax on $13.61 million). The state inheritance tax calculations use simplified models based on the relationship category and applicable state rate. Real state calculations may involve additional exemptions and credits not captured here, so this should be treated as an estimate.
All calculations execute in your browser with no server communication. The tool has been tested on Chrome 131+, Firefox, Safari, and Edge to ensure consistent results. PageSpeed optimization keeps load times minimal even on slower connections.
Worked Examples
Running through specific scenarios is the best way to understand how estate and inheritance taxes actually work. I've put together four examples at different estate sizes, each showing the step-by-step calculation.
Example 1 · $5 Million Estate in Pennsylvania
A parent leaves $5 million to their only child. The estate is well below the $13.61M federal exemption, so there is zero federal estate tax. However, Pennsylvania charges 4.5% inheritance tax on transfers to children. The calculation: $5,000,000 times 4.5% = $225,000 in state inheritance tax. The child receives $4,775,000 after tax. Effective combined rate: 4.5%.
If the same $5 million went to a sibling instead, Pennsylvania would charge 12%, resulting in $600,000 in tax and a net inheritance of $4,400,000. If it went to a friend, the rate jumps to 15%, producing $750,000 in tax.
Example 2 · $20 Million Estate in New Jersey
A parent leaves $20 million to two children equally ($10 million each). Federal estate tax applies to the amount over $13.61 million, which is $6.39 million. Using the progressive brackets, the federal estate tax is approximately $2,556,000. Since New Jersey exempts children from inheritance tax, there is no state-level tax. Each child receives approximately ($20,000,000 minus $2,556,000) divided by 2 = $8,722,000. Federal effective rate: 12.78%.
If the same estate were left to a nephew in New Jersey, the federal tax remains the same, but the state adds approximately 15% on amounts over $500. The state inheritance tax on $10 million would be about $1,499,925 per beneficiary, dramatically increasing the total tax burden.
Example 3 · $30 Million Estate with Charitable Giving
An individual has a $30 million estate and leaves $5 million to a charitable foundation. The charitable bequest reduces the taxable estate to $25 million. Federal estate tax applies to $25M minus $13.61M = $11.39M. At effectively 40% on amounts over the exemption, the tax is approximately $4,556,000. Without the charitable deduction, the tax would have been on $16.39M (approximately $6,556,000), saving about $2,000,000 in federal estate tax. Plus, the charitable contribution supports causes the individual cared about.
Example 4 · Married Couple Using Portability
A married couple has a combined estate of $25 million. The first spouse dies, leaving everything to the surviving spouse through the unlimited marital deduction. Federal estate tax: $0. The executor files Form 706 to elect portability, preserving the deceased spouse's $13.61M exemption. The surviving spouse now has an effective exemption of $27.22M ($13.61M personal + $13.61M ported). When the surviving spouse dies with the $25M estate, the entire amount is below the combined exemption. Federal estate tax: $0. Without portability, the surviving spouse would owe tax on $25M minus $13.61M = $11.39M, approximately $4,556,000.
Historical Exemption Amounts
The federal estate tax exemption has varied dramatically over the decades. Understanding this history helps put the current exemption in context and shows why planning around legislative changes is so important.
| Year | Exemption Amount | Top Rate | Notable Change |
|---|---|---|---|
| 1997 | $600,000 | 55% | Taxpayer Relief Act baseline |
| 2001 | $675,000 | 55% | EGTRRA phase-in begins |
| 2002 | $1,000,000 | 50% | First major increase |
| 2004 | $1,500,000 | 48% | Continued phase-in |
| 2006 | $2,000,000 | 46% | Rate continues declining |
| 2009 | $3,500,000 | 45% | Pre-repeal maximum |
| 2010 | Repealed (optional) | 0% or 35% | One-year repeal with carryover basis option |
| 2011 | $5,000,000 | 35% | Tax Relief Act of 2010 |
| 2013 | $5,250,000 | 40% | American Taxpayer Relief Act (permanent) |
| 2017 | $5,490,000 | 40% | Pre-TCJA level |
| 2018 | $11,180,000 | 40% | TCJA doubled the exemption |
| 2023 | $12,920,000 | 40% | Inflation-adjusted |
| 2024 | $13,610,000 | 40% | Current year |
| 2026 (est.) | ~$7,000,000 | 40% | TCJA sunset (without Congressional action) |
The 2010 repeal year was particularly chaotic. Estates could choose between no estate tax (but with modified carryover basis for beneficiaries) or the 2011 rules (with stepped-up basis). The death of billionaire George Steinbrenner in 2010 highlighted how much a single year's rules could matter. His family reportedly saved hundreds of millions because his death fell during the repeal year.
Looking at the trajectory, the exemption has been on a generally upward trend since 1997. However, the TCJA doubling in 2018 was temporary by design. The scheduled sunset represents the largest single-year reduction in estate tax exemption in U.S. history, affecting an estimated 40,000 to 60,000 additional estates per year.
Estate Planning Timeline
Estate planning is not a one-time event. It requires updates at major life changes and in response to evolving tax laws. Here is the timeline I recommend to clients and readers.
When to Create or Update Your Estate Plan
| Life Event | Action Needed | Priority |
|---|---|---|
| Marriage | Create joint plan, update beneficiaries, consider marital trusts | Immediate |
| Birth of child | Add guardianship provisions, update trust beneficiaries | Within 30 days |
| Divorce | Complete overhaul of all documents, remove ex-spouse | Immediate |
| Death of spouse | File Form 706 for portability, update all documents | Within 9 months |
| Major asset purchase | Review trust funding, retitle assets if needed | Within 60 days |
| Business started/sold | Business succession planning, valuation discounts | Within 90 days |
| Moving to new state | Review state estate/inheritance tax, update documents | Within 90 days |
| Tax law changes | Review exemption amounts, trust structures, gifting strategies | Annual review |
| Every 3-5 years | General review even without changes | Scheduled |
The most common mistake I see is people creating an estate plan once and never revisiting it. Tax laws change, family situations evolve, and asset values fluctuate. A plan created when the exemption was $5 million may need significant revision now that the exemption is $13.61 million and scheduled to drop again.
Another frequently overlooked step is retitling assets after creating a trust. A revocable living trust only avoids probate for assets actually held in the trust's name. If you create a trust but never transfer your house, bank accounts, or investment accounts into it, those assets still go through probate. I have seen families spend thousands in probate costs because of this simple oversight.
Types of Trusts for Estate Planning
Trusts are the primary tool for modern estate planning. Each type serves a different purpose, and understanding the distinctions helps you choose the right structure for your situation.
Revocable Living Trust
The most common estate planning trust. You maintain full control during your lifetime and can modify or revoke it at any time. Assets in the trust avoid probate at death, providing privacy and faster distribution. However, a revocable trust does not reduce estate taxes because you retain control over the assets. The trust's assets are still included in your taxable estate.
Irrevocable Trust
Once created, you generally cannot modify or revoke this trust. Assets transferred to an irrevocable trust are removed from your taxable estate, potentially saving significant estate taxes. The trade-off is loss of control. Common types include irrevocable life insurance trusts (ILITs), grantor retained annuity trusts (GRATs), and qualified personal residence trusts (QPRTs).
Bypass Trust (Credit Shelter Trust)
Created at the first spouse's death, this trust holds assets up to the exemption amount. The surviving spouse can receive income from the trust and access principal under certain conditions, but the trust assets are not included in the surviving spouse's estate. Before portability was introduced in 2011, bypass trusts were the only way to use both spouses' exemptions. They remain useful for families who want asset protection or whose assets may appreciate significantly.
Grantor Retained Annuity Trust (GRAT)
You transfer assets to the trust and receive annuity payments back over a fixed term. If the assets grow faster than the IRS Section 7520 rate (a hurdle rate based on federal interest rates), the excess growth passes to beneficiaries tax-free. GRATs are particularly effective for transferring rapidly appreciating assets like pre-IPO stock. A "zeroed-out GRAT" is structured so the present value of the annuity payments equals the value of the transferred assets, resulting in zero gift tax on creation.
Dynasty Trust
Designed to last for multiple generations without incurring estate or generation-skipping transfer (GST) tax at each generational level. Some states (like South Dakota, Nevada, and Delaware) allow trusts to last indefinitely. A dynasty trust funded with $13.61 million could theoretically grow for centuries without being subject to estate tax at any generational transfer. This is one reason why some states have become popular trust jurisdictions.
| Trust Type | Estate Tax Reduction | Your Control | Probate Avoidance | Complexity |
|---|---|---|---|---|
| Revocable Living | No | Full | Yes | Low |
| Irrevocable | Yes | None | Yes | Medium |
| ILIT | Yes | None | Yes | Medium |
| GRAT | Partial | Limited | Yes | High |
| Bypass/Credit Shelter | Yes | None (surviving spouse has limited access) | Yes | Medium |
| Dynasty | Yes (multi-generational) | None | Yes | High |
| Charitable Remainder | Partial | Limited | Yes | High |
State Estate Taxes (Separate from Inheritance)
In addition to the six states with inheritance taxes, twelve states plus the District of Columbia impose their own estate taxes with exemptions significantly lower than the federal exemption. These are separate from inheritance taxes and apply to the estate as a whole, not to individual beneficiaries.
| State | Estate Tax Exemption | Top Rate | Notes |
|---|---|---|---|
| Connecticut | $13.61M (matches federal) | 12% | Only state matching federal exemption |
| District of Columbia | $4,528,800 | 16% | Indexed for inflation |
| Hawaii | $5,490,000 | 20% | Highest top rate in the nation |
| Illinois | $4,000,000 | 16% | No inflation indexing |
| Maine | $6,800,000 | 12% | Inflation-indexed |
| Maryland | $5,000,000 | 16% | Also has inheritance tax |
| Massachusetts | $2,000,000 | 16% | Lowest exemption in the U.S. |
| Minnesota | $3,000,000 | 16% | No inflation indexing |
| New York | $6,940,000 | 16% | "Cliff" provision removes full exemption |
| Oregon | $1,000,000 | 16% | Tied for lowest exemption |
| Rhode Island | $1,774,583 | 16% | Inflation-indexed |
| Vermont | $5,000,000 | 16% | Flat rate above exemption |
| Washington | $2,193,000 | 20% | Tied for highest rate |
Massachusetts and Oregon have the lowest exemptions at $2 million and $1 million respectively. This means estates far below the federal threshold can still owe state estate tax. A $3 million estate in Massachusetts would owe zero federal tax but face state estate tax on the amount above $2 million.
New York has a particularly punishing "cliff" provision. If the estate exceeds 105% of the exemption amount, the entire exemption is lost and the full estate is taxed from dollar one. For example, if the exemption is $6.94 million and the estate is $7.3 million (just over 105%), the entire $7.3 million is subject to New York estate tax. This can create situations where dying with an estate of $7.3 million results in less money for heirs than dying with $6.94 million.
International and Cross-Border Estates
Cross-border estates present unique challenges. Non-resident aliens (people who are not U.S. citizens and not domiciled in the U.S.) face a drastically different federal estate tax regime.
The federal estate tax exemption for non-resident aliens is only $60,000 (compared to $13.61 million for U.S. citizens and residents). This means a non-resident alien who owns U.S. real estate, stocks in U.S. companies, or other U.S.-situs assets worth more than $60,000 could face federal estate tax at rates up to 40%.
U.S.-situs assets include real estate located in the U.S., tangible personal property in the U.S., and shares of stock in U.S. corporations. However, bank deposits and proceeds from life insurance on the life of a non-resident alien are generally not considered U.S.-situs assets.
The U.S. has estate and gift tax treaties with approximately 16 countries, including the United Kingdom, Canada, Germany, France, Japan, and Australia. These treaties can modify the standard rules, often providing larger exemptions or credits for treaty country residents. Without a treaty, the $60,000 exemption is all that applies.
| Status | Estate Tax Exemption | Marital Deduction | Worldwide Assets Taxed? |
|---|---|---|---|
| U.S. Citizen | $13.61 million | Unlimited | Yes |
| U.S. Resident (non-citizen) | $13.61 million | QDOT required | Yes |
| Non-Resident Alien | $60,000 | QDOT required | No (U.S.-situs only) |
| Treaty Country Resident | Varies (often prorated) | Treaty-dependent | Treaty-dependent |
For non-citizen spouses, the unlimited marital deduction is not automatically available. Instead, transfers must be made to a Qualified Domestic Trust (QDOT) to defer estate tax. The QDOT must have at least one U.S. trustee, and distributions of principal from the trust are subject to estate tax. This requirement catches many binational couples by surprise.
Strategies for Non-Resident Aliens
Given the $60,000 exemption, non-resident aliens need to plan carefully when investing in U.S. assets. Common approaches include holding U.S. stocks through a non-U.S. corporation (which converts the asset from U.S.-situs to non-U.S.-situs), using life insurance to provide liquidity for estate tax payments, and structuring ownership through limited partnerships or LLCs for valuation discount purposes.
Canadian residents benefit from the U.S.-Canada estate tax treaty, which provides a prorated exemption based on the ratio of U.S.-situs assets to worldwide assets. For example, if a Canadian resident has $20 million in worldwide assets and $5 million in U.S. real estate (25% of total), the prorated exemption would be approximately 25% of $13.61 million, or $3.4 million. This substantially reduces the estate tax exposure compared to the standard $60,000 exemption.
U.K. residents benefit from a similar treaty provision. The U.S.-U.K. estate tax treaty provides a credit mechanism that can significantly reduce or eliminate U.S. estate tax for U.K. domiciliaries. However, the interaction between U.S. estate tax, U.K. inheritance tax (which has its own 40% rate above a 325,000 pound nil-rate band), and treaty credits is extraordinarily complex. Professional advice is not optional in these situations.
Generation-Skipping Transfer Tax
The generation-skipping transfer (GST) tax is an often-overlooked third layer of transfer taxation that applies when assets skip a generation. If a grandparent leaves assets directly to a grandchild (skipping the child's generation), the GST tax applies in addition to any estate tax. The GST tax rate is a flat 40%, the same as the top estate tax rate.
Each person has a GST exemption equal to the estate tax exemption ($13.61 million in 2025). The GST exemption can be allocated to trusts or direct transfers to skip-generation beneficiaries. Once allocated, the exemption protects those assets from GST tax indefinitely, even as they grow in value. This is the foundation of dynasty trust planning.
Without proper GST planning, a transfer could face both estate tax and GST tax. For example, if a grandparent with no remaining GST exemption leaves $1 million to a grandchild, the combined tax burden could exceed 64% (40% estate tax on the full amount, plus 40% GST tax on the remainder). Proper planning avoids this double taxation entirely.
The GST tax also applies to distributions from trusts to skip-generation beneficiaries and to terminations of interests in trusts where the beneficiary is a skip person. This means even trusts created decades ago can trigger GST tax if the exemption was not properly allocated. I have seen situations where trustees discovered decades-old GST allocation errors that resulted in significant tax liability.
Valuation Discounts for Family Entities
One of the most effective (and controversial) estate planning tools is the use of valuation discounts for interests in family limited partnerships (FLPs) and family limited liability companies (LLCs). When you transfer a minority interest in a family entity, that interest is typically worth less than its proportionate share of the underlying assets because the recipient lacks control and marketability.
Combined discounts for lack of control and lack of marketability can range from 25% to 40% of the underlying asset value. For example, a 30% limited partnership interest in an FLP holding $10 million in assets has a proportionate value of $3 million but might be appraised at $1.8 million to $2.25 million after discounts. This allows you to transfer more wealth within your exemption amount.
The IRS has challenged aggressive valuation discounts, particularly when the entity holds mostly passive assets (like marketable securities or cash) and the entity structure appears to serve no legitimate business purpose. Proposed regulations in recent years have attempted to limit these discounts, so consulting with a qualified appraiser and estate attorney is important before implementing this strategy.
Video Guide
This video covers the fundamentals of estate and inheritance taxes, including the critical differences between the two and strategies for minimizing your family's tax exposure.