Estate Tax Calculator

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Estate tax calculator is an easy tool to find out the federal estate tax which imposed on the total value of estate of deceased person . Since this tax is imposed for the first time only on happening of one’s demise, it is also referred to as a “death tax.” Basically, the Estate Tax is a tax on the value of property less an exempted value specified by IRS each year when the said property is transferred to legal owners who inherits it.

Estate Tax Calculator

Basic Exemption to Estate Tax

After Tax Cuts & Jobs Act , most of the low valued estate wont have to pay estate tax as the , estate tax basic tax exemptions threshold has gone up substantially. For the year 2019 ,it is $11.40 million whereas for the year 2020, it is 11.58 million.Further, there is no estate tax if the assets are the transferred from deceased person to his/her surviving spouse.

YearBasic ExemptionTax Rates
2018118,000,00040.00%
2019114,000,00040.00%
2020115,800,00040.00%
2021117,000,00040.00%

How Gift Reduces Basic Exemption on Estate Taxable Value

Section 2503 of 26 US Code provides the taxation of gifts. It is provided that for calendar year 2021, the first $15,000 of gifts to any person (other than gifts of future interests in property) shall be exempt .Therefore ,each individual can give away $15,000 to any other US citizen with no federal gift tax consequences. Married couples can combine these amounts and make $30,000 gifts to each individual.

While computing the net taxable estate value, the aggregate amount of gifts has to be deducted from the total exemption of $117,000,000 . So more the deceased had given gift , less amount of exemption available.

Estate Tax vs Income Tax on Estate vs Inheritance Tax

Estate tax and tax on income of an estate and inheritance tax are entirely different things and are dealt separately under 26 US Code.

What is estate tax?

Estate taxes are computed by aggregating the total value of the deceased’s assets like immovable property and movable property like shares,bonds etc minus any liability that the estate may have. If the value of these assets does not exceed the basic state/federal exemption(11.58 million for 2020), no estate taxes are owed.

What is income tax on estate?

Think this . a person was carrying on business and also put his property on rent. If he dies , those income does not stop accruing after his death. So the tax law as per section 26 US Code 641 , any income generated to the person who dies is taxable in the hand of his/her estate.So, the income is aggregated and then tax is computed by applying estate income tax rates.

What is Inheritance Tax?

Inheritance tax is also associated with the value of the property of a deceased person. But the difference between Estate Tax and Inheritance tax is that while estate tax is paid by estate itself, the inheritance tax is paid by the person who receives the asset of a deceased person

Do you need to file any form for estate with IRS?

Internal Revenue Code. provides that the executor of a estate of a US citizen or resident should compute the estate tax by filing Form 706 and submit the Form 706 to IRS in following two situations

a. If the value of estate in year 2021 , plus adjusted taxable gifts and setting off the exemption, is more than $11,720,000; or

b. Whose executor elects to transfer the DSUE amount to the surviving spouse, regardless of the size of the decedent’s gross estate.

By Prashant Thakur

Prashant Thakur is a tax advisor . He has written two books on tax laws of India. He regularly writes on his paid-only website http://taxworry.com. He is learning about the Internal Revenue Code of USA as many of clients and readers are of India origin and also are tax resident of USA . So . solving their tax issues require reference to IRC of USA.