ReckonBoxWhat the estate tax actually takes
The federal estate tax is a 40% tax on the value of an estate above the exemption, which is $15 million per person for 2026. The 40% figure scares people who will never owe a dollar, because it applies only to the slice above the exemption and leaves the rest untouched.
Picture a $20 million estate with $500,000 of debts. The taxable estate is $19.5 million. Subtract the $15 million exemption and $4.5 million is exposed. At 40% that is a $1.8 million tax, and $17.7 million passes to the heirs. Spread that tax across the full estate and the effective rate is 9%. The exemption did the heavy lifting.
| $20 million estate, 2026 | Amount |
|---|---|
| Taxable estate | $19,500,000 |
| Exemption applied | $15,000,000 |
| Taxed at 40% | $4,500,000 |
| Federal estate tax | $1,800,000 |
| Effective rate | 9% |
The exemption the OBBBA made permanent
For 2026 the estate and gift tax exemption is $15 million per person, set as permanent by the One Big Beautiful Bill Act and indexed for inflation after. Before that law, the exemption was scheduled to fall to roughly $7 million at the end of 2025.
The July 2025 act removed that cliff and fixed the exemption at $15 million, confirmed across estate-planning analyses from firms like Goodwin and Arnold & Porter. A married couple gets two exemptions, so with portability, the ability of a surviving spouse to claim a deceased spouse's unused amount, a couple can pass up to $30 million free of federal estate tax. That is why the married option here doubles the shield: an $18 million estate that would owe tax as a single person owes nothing as a couple.
Why the effective rate stays low
The estate tax uses a graduated schedule that tops out at 40%, but the exemption is applied as a credit against the tax on the first $15 million. Since $15 million sits far above the roughly $1 million point where the schedule already reaches 40%, every taxable dollar above the exemption is taxed at a flat 40%. The whole estate never pays 40%, though. An estate has to run several times the exemption before its blended rate climbs anywhere near the marginal one, which is the arithmetic most headlines skip.
Gifts and charity change the number
Two entries move the result in opposite directions. Charitable bequests are fully deductible, so leaving $5 million to charity from a $20 million estate drops the taxable estate to $15 million and the tax to zero. Lifetime gifts work the other way: the estate and gift taxes share one exemption, so taxable gifts you made while alive have already spent part of the $15 million. Use $3 million on lifetime gifts and only $12 million of exemption is left for the estate. Both fields are here so the remaining exemption reflects what you have actually used.
What this does not cover
This estimates federal estate tax only. About a dozen states plus the District of Columbia levy their own estate tax, and several states impose an inheritance tax on what beneficiaries receive, often with thresholds far below the federal $15 million. Someone in Oregon or Massachusetts can owe state estate tax with no federal tax due at all. The tool also does not model trusts, the unlimited marital deduction for assets left outright to a spouse, valuation discounts, or generation-skipping transfer tax.
None of this is legal or tax advice. It shows how the federal exemption and the 40% rate produce a number. Estate planning turns on your state, your documents, and your goals, so an estate attorney and a tax advisor are the people to see.
Frequently asked questions
How much is the federal estate tax exemption for 2026? The federal estate tax exemption is $15 million per person for 2026, which the One Big Beautiful Bill Act set as permanent and indexed for inflation after. A married couple can shield up to $30 million by combining both exemptions through portability. Only the value of an estate above the exemption is subject to federal estate tax.
What is the federal estate tax rate? The top federal estate tax rate is 40%, and it applies only to the amount above your exemption, not the whole estate. Because the $15 million exemption sits far above the point where the schedule reaches 40%, every taxable dollar above the exemption is effectively taxed at 40%, while the exemption itself passes tax free.
How much estate tax would a $20 million estate owe? A $20 million estate with $500,000 of debts has a $19.5 million taxable estate, of which $4.5 million sits above the $15 million exemption. At 40%, that is a $1.8 million federal estate tax, so $17.7 million passes to heirs. The effective rate on the whole estate is 9%, not 40%, because most of it is exempt.
Why is the effective estate tax rate lower than 40%? Because the 40% rate hits only the portion above the exemption. The first $15 million (or $30 million for a couple) is untaxed, so even a large estate pays a blended rate well below 40%. An estate has to be several times the exemption before its effective rate climbs close to the 40% marginal rate.
Does this include state estate or inheritance taxes? No, this estimates federal estate tax only. Around a dozen states plus the District of Columbia levy their own estate tax, and several states have an inheritance tax, often with thresholds far below the federal $15 million. If you live in one of those states, the state tax can apply even when no federal tax is due.
How do lifetime gifts affect the estate tax? The estate and gift tax share one lifetime exemption, so taxable gifts you make during life use up part of the $15 million before death. If you have already used $3 million on lifetime gifts, only $12 million of exemption remains for your estate. This tool lets you enter the amount used so the remaining exemption is correct.