Estate Tax Calculator
Use our free estate tax calculator to estimate how much money you’ll need to pay in federal estate taxes.
Our estate tax calculator allows you to estimate just how much you’ll need to pay in federal estate taxes. This can better prepare you and your beneficiaries to manage your finances.
What Is Estate Tax?
Estate tax, sometimes known as the “death tax,” is the tax you pay based on the value of your estate when you pass away. This tax is levied at the federal level, though many states have their own estate tax that would need to be paid in addition to the federal estate tax. That said, most estates do not have to pay the estate tax because they don’t exceed the minimum threshold. In 2023, all estates valued above $12,920,000 must pay the estate tax. This threshold is expected to increase to $13,610,000 by 2024.1
Pro Tip: Need help planning your estate and retirement? Check out our guide to senior finances for help!
It’s important to note that the estate tax only applies to the value of your estate above the current threshold. If you pass an estate valued at $15,000,000 to beneficiaries in 2023, the executor of your estate would be required to file an estate tax return and pay estate taxes on the difference; in this case, $2,080,000.
Estate Tax vs. Inheritance Tax
Since both taxes are paid when someone dies and passes an estate (or part of an estate) on to their beneficiaries, it’s easy to get the estate tax and inheritance tax confused. However, an estate tax is paid directly from the estate itself and managed by an executor or trustee. In other words, it is paid from the value of the estate before beneficiaries come into possession of the estate.
Alternatively, beneficiaries who inherit some or all of an estate may be required to pay an inheritance tax. There is no inheritance tax imposed at the federal level. As of 2023, only six states impose an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. The tax rates, rules, and exemptions on inheritance taxes vary from state to state.
Tips to Reduce Your Estate Tax
If your estate is valued above the current threshold, you will almost certainly have to pay taxes on it. That said, there are various ways to reduce your estate tax burden in retirement:
- Donate to charity: Donating to charity is one of the simplest ways to reduce your estate tax burden. There are also no limitations on how much you can donate, so if you prefer to give to charity rather than pay taxes, this is a way to potentially avoid estate taxes entirely.
- Reduce the value of your estate: By liquidating certain assets and spending cash, you can reduce the value of your estate. However, be careful not to spend frivolously, as it could negatively impact your estate plan.
- Marital transfer: If you’re married and have a surviving spouse at the time of your passing, you can transfer your gifts or assets to your spouse through your will. This method does not eliminate the estate taxes you owe; it simply defers them to a later date.
- Relocate: If you establish yourself in a state that does not have its own estate or inheritance tax, you can pass on more of your estate to your beneficiaries.
How to Use Our Estate Tax Calculator
While calculating estate taxes can be complex, using our free estate tax calculator is easy. You simply need to input the following information:
- Personal assets
- Investment assets
- Business assets
- Charitable contributions
- Probate and final expenses
- Number of years to project estate growth
When inputting all of your assets, you’ll need to include three different figures – value, estimated growth, and liabilities. Any debts that you or your business have will reduce the value of your estate, thereby reducing your estate tax. In any case, your personal, investment, and business assets will form the basis of your estate’s value.
FYI: Looking for even more ways to lower your tax burden? Check out our guide on tax credits and deductions for seniors!
Next, include the total value of any charitable donations you have made and any that you intend to make in the future. Probate and final expenses will be represented as a percentage of your estate, which could vary based on your estate’s size. Finally, include how many years your estate is projected to grow. This figure is another way to estimate your life expectancy, which will determine when estate taxes will be paid.
Once you input all of the information, you’ll see how each piece of information adds or subtracts from the total value of your estate. You’ll also see how your estate will likely grow over time. Finally, you’ll see the percentage of estate taxes that would be paid based on the information you provided.
Internal Revenue Service. (2023). Estate Tax.