Federal Estate and Gift Tax Exemption Calculator – Lifetime Shield & TCJA Sunset
Understanding Federal Estate & Gift Tax Rules
The United States levies a unified transfer tax on wealth passed to heirs either during life (Gift Tax) or at death (Estate Tax). The top federal estate tax bracket is fixed at a steep 40% on all assets exceeding the lifetime basic exclusion amount.
The 2026 Lifetime Exclusion & Portability
- Unified Basic Exclusion Amount: Currently set at $13,610,000 per individual ($27,220,000 for married couples), inflation-adjusted annually.
- Marital Deduction & DSUE Portability: Transfers between US citizen spouses are 100% tax-free under the unlimited marital deduction. Furthermore, filing Form 706 allows a surviving spouse to claim the Deceased Spousal Unused Exclusion (DSUE), effectively doubling family protection.
- Annual Gift Tax Exclusion ($18,000): You can give up to $18,000 per year per recipient ($36,000 for married couples via gift splitting) to an unlimited number of children, relatives, or friends with zero gift tax consequences and zero reporting required.
The Impending Sunset Cliff
Unless Congress enacts legislation, the Tax Cuts and Jobs Act provisions sunset on January 1, 2026. The exemption will revert to approximately $7,000,000 per person, subjecting millions of affluent families and business owners to unexpected 40% estate taxes.
Frequently asked questions
Do life insurance death benefits count toward the estate tax limit?
Yes! If you own the life insurance policy at the time of your death, the entire death benefit proceeds are included in your taxable gross estate. Wealthy families use Irrevocable Life Insurance Trusts (ILITs) to remove life insurance proceeds from estate taxation.
What is the stepped-up basis rule at death?
Under IRC Section 1014, heirs receive a 'step-up' in cost basis to the fair market value of appreciated assets on the decedent's date of death, completely wiping out lifetime capital gains taxes on real estate and stock portfolios.
Do individual states impose their own estate taxes?
Yes. Twelve states (including Massachusetts, Oregon, Washington, New York, and Illinois) levy separate state-level estate taxes with much lower exemption thresholds (e.g. $1M to $2M).
Form LLCs, register S-Corp elections, and consult verified tax CPAs to maximize Section 179 and QBI write-offs.