Question 1

What is the federal estate tax and who pays it?

Accepted Answer

The federal estate tax is a tax on the transfer of assets from a deceased person to their heirs. It is imposed on the taxable estate — the gross estate minus allowable deductions (debts, mortgages, funeral expenses, marital deduction, charitable deduction). Under IRC §2001, the estate tax applies at a progressive rate schedule, with a top rate of 40%. However, the unified credit under IRC §2010 shields the first [applicable exclusion amount] of every estate from tax entirely. Under 2025 law, only estates larger than $13.99M per person owe any federal estate tax. According to IRS Statistics of Income data, fewer than 0.5% of all decedents owe federal estate tax in any given year — but for those who do, the liability can be substantial. Consult a licensed estate planning attorney before any planning decisions.

Question 2

What is the TCJA sunset and why does it matter for 2026?

Accepted Answer

The Tax Cuts and Jobs Act of 2017 (TCJA) roughly doubled the federal estate and gift tax exemption from its pre-2018 level. Before TCJA, the per-person exemption was approximately $5.49M (2017). TCJA raised it to $11.18M in 2018, and annual inflation adjustments have since pushed it to $13.99M in 2025 (per IRS Rev. Proc. 2024-40). However, under IRC §2010(c)(3)(C), the TCJA exemption increase is scheduled to 'sunset' — expire — on December 31, 2025. If Congress does not act, the per-person exemption reverts to pre-2017 law indexed for inflation from 2010, which practitioners widely estimate at approximately $7M per person in 2026. This halving of the exemption would subject many more estates to federal estate tax — anyone with an estate between $7M and $13.99M that currently owes nothing would suddenly face a potentially significant tax bill. This is the #1 estate planning issue heading into 2026. Source: IRC §2010(c)(3)(C), IRS Rev. Proc. 2024-40.

Question 3

Will OBBBA or other legislation prevent the TCJA sunset?

Accepted Answer

As of the date this calculator was last updated (2026-05-23), the One Big Beautiful Bill Act (OBBBA) is advancing in Congress and, if enacted, would make the TCJA estate tax exemption permanent — eliminating the sunset risk. Several other legislative proposals have also been introduced. However, legislation is not final law until enacted and signed. Estate planning attorneys widely recommend their clients plan as if the sunset will occur, then update plans if/when legislation passes. The anti-clawback regulations (TD 9884, 2019; 26 CFR §20.2010-1(c)) already protect gifts made under the elevated TCJA exemption: estates will not be clawed back to a higher tax if the decedent dies after the sunset date. This means gifts made now under the $13.99M exemption are protected even if the exemption later drops. Consult a licensed estate planning attorney before acting.

Question 4

What is the marital deduction and how does it work?

Accepted Answer

The unlimited marital deduction (IRC §2056) allows an unlimited amount of assets to pass to a surviving U.S.-citizen spouse without federal estate tax. This does not eliminate the estate tax — it defers it to the second spouse's death. When the surviving spouse later dies, their estate will owe tax on the combined assets (plus appreciation) above the surviving spouse's applicable exclusion. Portability (IRC §2010(c)(5)) allows the surviving spouse to 'inherit' the deceased spouse's unused exclusion amount (DSUE) by timely filing a federal estate tax return for the first spouse. This calculator models portability by doubling the per-person exclusion for married filers — a simplified but common planning assumption. For precise portability calculations, consult a CPA or estate planning attorney. Consult a licensed estate planning attorney before any planning decisions.

Question 5

What is the anti-clawback rule, and should I make gifts now?

Accepted Answer

The anti-clawback regulations (TD 9884, 2019; 26 CFR §20.2010-1(c)) were issued by the IRS in response to the TCJA sunset uncertainty. They confirm that taxable gifts made while the higher TCJA exemption was in effect will not be 'clawed back' — that is, the IRS will not retroactively impose estate tax on those gifts just because the decedent died after the exemption reverted to a lower level. In practical terms: if you make a $13.99M gift to an irrevocable trust in 2025 under the elevated exemption, and you die in 2027 when the exemption is ~$7M, the gift will not be pulled back into your estate. The estate will be calculated using the higher of the gift exclusion used (at the time of the gift) or the current exclusion (at the time of death). This has led many estate planning attorneys to recommend clients 'use it or lose it' — make large gifts before December 31, 2025 if they have taxable estates. Whether this strategy is appropriate depends on your specific estate, liquidity, tax situation, and personal objectives. Always consult a licensed estate planning attorney. Source: 26 CFR §20.2010-1(c), IRS TD 9884.

Question 6

What are adjusted taxable gifts and why do they matter?

Accepted Answer

Under IRC §2001(b), the estate tax is computed using a mechanic that adds 'adjusted taxable gifts' (taxable gifts made after December 31, 1976) back to the taxable estate. The unified credit then offsets the tax attributable to the exclusion amount. This ensures that gifts consumed during life and estate transfers at death are taxed under a unified rate schedule — you cannot escape the progressive brackets by making gifts instead of bequests. If you have made substantial taxable gifts in prior years (gifts above the annual exclusion that consumed lifetime exemption), those should be entered in the 'Prior taxable gifts' field. Failing to include prior gifts will cause this calculator to understate your tentative estate tax. Gift tax previously paid (under Form 709) is subtracted from the tentative tax — for simplicity, this calculator assumes gift tax was paid at the same rate schedule. Consult a CPA or estate planning attorney for precision calculations involving prior gifts. Source: IRC §2001(b), Form 709 instructions.

Question 7

Does this calculator include state estate taxes?

Accepted Answer

No. Twelve states and the District of Columbia impose their own estate tax separate from the federal estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. Several of these states have exemptions well below the federal exemption — Massachusetts and Oregon, for example, have exemptions of $1M and $1M respectively (as of recent law). This means residents of those states with estates between $1M and $13.99M owe state estate tax but no federal estate tax under current law. This calculator computes only the federal estate tax. A comprehensive estate plan must account for state estate taxes, income taxes on income-in-respect-of-a-decedent (IRD) assets like traditional IRAs, state inheritance taxes in a handful of states, and administrative costs. The figures shown here will understate the total estate transfer tax burden for residents of state-tax states. Consult a licensed estate planning attorney in your state.

Question 8

What planning strategies can reduce estate tax before the TCJA sunset?

Accepted Answer

Estate planning attorneys commonly recommend several strategies to reduce federal estate tax exposure before the sunset: (1) Large gifts to irrevocable trusts (SLAT — Spousal Lifetime Access Trust, IDGT — Intentionally Defective Grantor Trust, QPRT — Qualified Personal Residence Trust) before December 31, 2025, leveraging the anti-clawback rule. (2) Accelerating charitable giving via direct gifts, Charitable Remainder Trusts (CRTs), or Charitable Lead Trusts (CLTs), which reduce the taxable estate while supporting causes. (3) Irrevocable Life Insurance Trusts (ILITs) that keep life insurance proceeds outside the estate. (4) Family Limited Partnerships (FLPs) or Family Limited Liability Companies (FLLCs) that apply valuation discounts for lack of marketability and lack of control. (5) Annual gifting ($19,000 per recipient per donor in 2025, per IRS Rev. Proc. 2024-40) to systematically reduce the estate. (6) Direct payments for tuition and medical expenses (§2503(e)) made directly to the institution — these are exempt from gift tax entirely and do not consume annual exclusion. The right strategy depends entirely on your specific estate, family situation, liquidity, tax basis of assets, and objectives. This calculator helps you quantify the problem; a licensed estate planning attorney and CPA help you solve it.

Federal Estate Tax Calculator (TCJA Sunset 2026 Toggle)

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