Updated June 17, 2026
Fewer than 1 in 500 estates ever write a check to the IRS for estate tax. That single statistic explains why so few people understand how the tax actually works: almost nobody has to. When it does apply, though, it applies at a flat 40% on everything above the exemption, and the mechanics are worth knowing before, not after, an estate crosses that line.
A quick example before the details
Take an estate worth $17,000,000. Subtract the $15,000,000 exemption and $2,000,000 is left exposed. At the 40% top rate, that produces a federal estate tax bill of roughly $800,000, the number the executor has to find before Form 706 even gets filed. Everything below walks through where each piece of that math comes from.
What counts in the gross estate
The gross estate is the fair market value at death of everything the decedent owned or controlled: real estate, bank and investment accounts, retirement balances (IRAs, 401(k)s and similar), life insurance proceeds where the decedent owned the policy, business interests, personal property, and taxable gifts made during life that are added back. Valuations use date-of-death market values, not original purchase prices.
What reduces the taxable estate
- Marital deduction: assets left to a surviving U.S. citizen spouse pass estate-tax free, in any amount. No cap. This is usually the largest single reduction for married couples.
- Charitable deduction: bequests to qualifying charities reduce the taxable estate dollar for dollar.
- Debts and mortgages: outstanding debts, including mortgages, are subtracted from the gross estate.
- Funeral and administration expenses: documented expenses are deductible.
The rate schedule
The rate schedule is graduated: the first $10,000 above the exemption is taxed at 18%, climbing to 40% at $1 million above the exemption. In practice, estates large enough to owe any federal tax are almost always well into the 40% bracket. The effective rate on the full taxable estate falls somewhat below 40% due to the lower tiers, but 40% is the figure most planners work with.
When the return is due
Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, is due nine months after the date of death. An automatic six-month filing extension is available, but it does not extend the payment deadline. Tax owed is still due at nine months. Below-threshold estates generally need not file at all, with one important exception: if the executor wants to elect portability of the first spouse's unused exemption, filing Form 706 is required even when no tax is owed.
Educational only, not legal or tax advice. Congress sets these rates and can change them; check with an estate attorney or CPA before relying on a specific number.
Layer state tax on top
Most estates that owe anything owe it to a state, not the IRS. Add your state to see the full picture.