Estate Tax
A federal tax on the transfer of wealth from a deceased person's estate to their heirs.
What is Estate Tax?
The federal estate tax is a tax on the right to transfer property upon death. It applies to the taxable estate — total assets minus debts and deductions — above the federal exemption threshold. For 2025, the exemption is $13.99 million per individual (or $27.98 million for a married couple). Estates above this threshold pay rates up to 40%. Most Americans are unaffected due to the high exemption. The exemption is scheduled to revert to roughly $7 million (inflation-adjusted) in 2026 when the Tax Cuts and Jobs Act provisions expire, unless Congress acts. Some states impose their own estate or inheritance taxes with lower thresholds.
Example
A single individual dies in 2025 with a taxable estate worth $20 million. After the $13.99 million federal exemption, $6.01 million is subject to estate tax. At a 40% top rate, the estate owes approximately $2.4 million in federal estate tax — money typically paid before assets are distributed to heirs.
Source: IRS — Estate Tax