How much can I leave to my heirs without paying federal estate tax?

What the Law Says

Federal estate tax applies only to estates exceeding a statutory exemption amount, which is adjusted annually for inflation and tied to a 'unified credit' that offsets the tax liability.

The federal estate tax is imposed on the transfer of a deceased person’s taxable estate. However, most estates never pay it because of a large exemption — the amount you can pass tax-free to heirs.

This exemption is set by law in Section 2010 of the Internal Revenue Code and is applied through a 'unified credit' that eliminates tax on estates up to the exemption threshold.

The exemption amount is indexed for inflation and changes each year. For 2024, it is $13.61 million per person. It is scheduled to revert to roughly half that amount (adjusted for inflation) after 2025 unless Congress acts.

The top estate tax rate is 40%, but it only applies to the portion of the estate exceeding the exemption.

Statutory Text

There is hereby allowed a credit against the tax imposed by section 2001 in an amount equal to the applicable credit amount.

— 26 U.S.C. § 2010(a) — Unified credit against estate tax

Statutory Text

The applicable credit amount is the dollar amount of the credit determined under subsection (b) against the tax imposed by section 2001.

— 26 U.S.C. § 2010(b) — Unified credit against estate tax

Statutory Text

The tax imposed by section 2001 shall be upon the transfer of the taxable estate of every decedent who is a citizen or resident of the United States.

— 26 U.S.C. § 2001(a) — Imposition and rate of tax

What to Do

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