Estate Tax Calculator
Estimate federal estate tax owed after accounting for the lifetime exemption, marital and charitable deductions, and prior gift taxes paid. Used by estate planners and heirs evaluating large inheritances.
About this calculator
The federal estate tax applies to the taxable estate — the value remaining after subtracting allowable deductions and the lifetime exemption. The 2023 federal exemption is $12,920,000 per individual, meaning estates below this threshold owe no federal estate tax. The taxable estate is calculated as: Taxable Estate = grossEstate − maritalDeduction − charitableDeduction − remainingExemption, where remainingExemption = max(0, $12,920,000 − lifetimeExemptionAlreadyUsed). The flat estate tax rate of 40% is then applied to the taxable estate: Estate Tax = max(0, taxableEstate × 0.40 − giftTaxesPaid). Gift taxes paid during life on taxable gifts are credited against the estate tax owed to prevent double taxation. Proper estate planning with trusts, charitable giving, and gifting strategies can significantly reduce or eliminate this liability.
How to use
Assume a gross estate of $20,000,000, a marital deduction of $2,000,000, a charitable deduction of $500,000, no prior lifetime exemption used, and $0 in gift taxes paid. Remaining exemption = $12,920,000 − $0 = $12,920,000. Taxable estate = $20,000,000 − $2,000,000 − $500,000 − $12,920,000 = $4,580,000. Estate tax = max(0, $4,580,000 × 0.40 − $0) = $1,832,000. The estate would owe $1,832,000 in federal taxes, which must typically be paid within nine months of the decedent's death.
Frequently asked questions
What is the federal estate tax exemption and how does it work in 2023?
The federal estate tax exemption for 2023 is $12,920,000 per individual, meaning the first $12.92 million of a taxable estate passes to heirs free of federal estate tax. Married couples can effectively double this amount to nearly $25.84 million through a portability election. Any portion of the exemption used for taxable lifetime gifts reduces the amount available at death. This exemption is scheduled to revert to approximately $6–7 million (inflation-adjusted) after 2025 when current tax law provisions sunset.
How does the marital deduction reduce estate taxes owed?
The unlimited marital deduction allows a U.S. citizen decedent to transfer any amount of assets to a surviving U.S. citizen spouse completely free of federal estate tax. This deduction effectively defers the tax until the surviving spouse's death. However, it does not eliminate the tax permanently — the surviving spouse's estate will be subject to estate tax on amounts exceeding the exemption at their death. Proper planning, such as using a Credit Shelter Trust (also called a bypass trust), can help both spouses maximize their individual exemptions.
Why are gift taxes paid during life credited against the estate tax?
The federal gift tax and estate tax are unified under a single transfer tax system to prevent people from avoiding estate tax by giving away assets before death. If you paid gift taxes on taxable gifts during your lifetime, those payments are credited against any estate tax owed at death, ensuring the same transferred wealth is not taxed twice. However, the lifetime exemption amounts used for taxable gifts reduce the exemption available to your estate. Coordinating lifetime gifting with estate planning is a key strategy for minimizing total transfer tax.