This website uses cookies to ensure you get the best experience on our website. Learn more

Got it!

estate tax

Estate tax is a federal tax on the transfer of property at death . It is imposed on the decedent’s entire taxable estate before distribution to heirs . By contrast, an inheritance tax is imposed on individuals who receive property from an estate; the United States does not impose a federal inheritance tax, although some states impose a state inheritance tax. 

The federal estate tax is closely coordinated with the federal gift tax to prevent avoidance through lifetime transfers. Both taxes apply at the same rates and share a unified exemption amount. The estate tax is codified in 26 U.S.C. § 2001 , and the gift tax in 26 U.S.C. § 2501 .

For 2025, the federal estate and gift tax exemption is $13.99 million per individual (or $27.98 million for married couples) , with a maximum tax rate of 40%. Under the One Big Beautiful Bill Act , signed on July 4, 2025, the exemption will permanently increase to $15 million per individual beginning in 2026, indexed annually for inflation.

Many states also impose their own estate or inheritance taxes, with exemption amounts and rates that differ from the federal system. As of 2025, five states impose an inheritance tax: Kentucky , Maryland , Nebraska , New Jersey , and Pennsylvania .

[Last reviewed in August of 2025 by the Wex Definitions Team
] 

Wex

• CIVICS

• taxation

• LIFE EVENTS

• family & personal matters

• elder law

• marriage

• financial events

• wills

• PROPERTY

• property & real estate law

• trusts

• inheritances & estates

• wex articles

• government

• tax