How to Calculate Federal Estate Tax
What is Federal Estate Tax?
The federal estate tax calculator determines whether an estate owes federal estate tax and how much. In 2024, estates under the $13.61 million exemption owe zero tax. Estates above the exemption are taxed at a top rate of 40% on the excess.
Formula
Estate Tax = (Taxable Estate – Exemption) × Graduated Rates (up to 40%)
- GE
- Gross Estate ($) — Total value of all assets at death
- D
- Deductions ($) — Debts, expenses, marital and charitable deductions
- EX
- Exemption ($) — Federal estate tax exemption ($13.61M in 2024)
- R
- Tax Rate (%) — Graduated rates from 18% to 40%
Step-by-Step Guide
- 1Calculate the gross estate: all assets the deceased owned or had interests in
- 2Subtract allowable deductions: debts, funeral expenses, charitable bequests, marital deduction
- 3Compare the taxable estate to the exemption ($13.61M per person in 2024)
- 4Apply graduated tax rates (18–40%) to the amount exceeding the exemption
Worked Examples
Input
Gross estate $16M, deductions $500K, single individual, 2024
Result
Taxable estate $15.5M – $13.61M exemption = $1.89M taxable at ~40% = ~$756,000 tax
Input
Estate $10M, married couple using portability
Result
Combined exemption $27.22M — no federal estate tax
Common Mistakes to Avoid
- ✕Not using portability to transfer the deceased spouse’s unused exemption (must file estate tax return)
- ✕Confusing the federal estate tax with state estate taxes (which have much lower exemptions)
- ✕Assuming the exemption will remain at $13.61M — it is scheduled to drop to ~$7M in 2026
Frequently Asked Questions
What happens to the exemption in 2026?
The Tax Cuts and Jobs Act doubled the exemption, but this provision sunsets after 2025. The exemption is projected to drop to approximately $7 million (adjusted for inflation) in 2026.
What is portability?
Portability allows a surviving spouse to use the deceased spouse’s unused estate tax exemption. You must file Form 706 within 9 months of death to elect portability.
Ready to calculate? Try the free Federal Estate Tax Calculator
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