The federal estate tax exemption for 2024 is $13.61 million per person

The estate tax exemption is the dollar amount your estate can be worth before the federal government taxes what you leave behind. For 2024, that limit is $13.61 million if you are a single person, or $27.22 million if you are married and both spouses use their exemptions together. This means most people will never owe federal estate tax at all — your estate has to be substantially larger than these thresholds for the tax to explore.

The exemption amount changes every year because it is tied to inflation. It was lower in previous years and will likely be different in future years. If your estate is smaller than the exemption for the year you die, your heirs inherit everything without paying federal estate tax to the government.

However, the exemption is set to drop significantly after 2025. Unless Congress changes the law, the exemption will fall to roughly $7 million per person (adjusted for inflation) starting in 2026. This means planning matters if your estate is close to or above that future threshold.

Key Takeaways

  • The 2024 federal estate tax exemption is $13.61 million per person, so estates below that amount owe no federal estate tax.
  • Married couples can combine their exemptions to shelter $27.22 million from federal estate tax in 2024.
  • The exemption amount changes yearly with inflation and is scheduled to drop to around $7 million per person in 2026 unless Congress acts.
  • State estate taxes have their own, usually much lower exemptions, and some states tax estates that the federal government does not touch.
  • Even if you do not owe estate tax, you may still need to file a federal estate tax return if your estate exceeds the exemption threshold.

Why the exemption matters for your planning

If your estate is below the exemption, you do not have to worry about federal estate tax, and your heirs inherit what you leave with no tax bill to the government. The exemption exists specifically to protect most families from this tax.

But if your estate is close to or above the exemption, the tax rate is steep — 40 percent of everything above the threshold. That means a $15 million estate in 2024 would owe $540,000 in federal tax (40 percent of the $1.39 million over the exemption). This is why people with larger estates often work with an attorney or tax professional to structure their assets in ways that reduce or eliminate the tax.

The scheduled drop in 2026 creates urgency for people with estates between $7 million and $13.61 million. If you fall into that range, you may have options now that will not be available after 2025, such as using your exemption before it shrinks.

How the exemption works when you die

When you die, your executor or personal representative must determine whether your estate owes federal estate tax. They add up the value of everything you owned — your house, bank accounts, investments, life insurance, retirement accounts, and anything else with monetary value. They subtract debts, funeral costs, and certain other expenses. The number left is your taxable estate.

If that taxable estate is below the exemption for the year of your death, no federal estate tax is owed. If it is above the exemption, the tax applies only to the amount over the threshold. Your executor files a federal estate tax return (Form 706) with the IRS, and the estate pays the tax before distributing money to heirs.

The exemption is a one-time use. Once you use it, it is gone. This is why married couples sometimes use both spouses' exemptions — they can shelter twice as much wealth.

State estate taxes operate separately from federal tax

Seventeen states plus Washington, D.C., have their own estate taxes, and they work independently of the federal exemption. This means your estate could owe no federal tax but still owe state tax, or vice versa.

State exemptions are much lower than the federal threshold. For example, Massachusetts has a $1 million exemption, New York has a $6.94 million exemption (as of 2024), and Oregon has a $1 million exemption. If you live in or own property in a state with an estate tax, you need to know that state's rules separately from the federal rules.

Some states also have inheritance taxes, which are taxes on what heirs receive rather than on the estate itself. These are different from estate taxes and explore in only a handful of states. Your state's tax rules depend on where you live and where your property is located.

The exemption drop after 2025

The current high exemption amounts are temporary. They were set by the Tax Cuts and Jobs Act of 2017, which doubled the exemption from roughly $5.5 million per person. That law is scheduled to expire on December 31, 2025, and unless Congress extends it, the exemption will fall back to approximately $7 million per person (adjusted for inflation) starting in 2026.

This creates a planning window for people with estates between $7 million and $13.61 million. Some choose to use their exemption now by making large gifts to heirs or trusts while the exemption is high. Others restructure their assets or set up trusts designed to minimize tax after 2026. These strategies require professional guidance and are not right for everyone.

Congress could change the law before 2026, either extending the high exemption, making it permanent, or letting it drop as scheduled. The outcome is uncertain, which is why people in this range often consult a tax attorney or estate planner to understand their options.

How to learn about your estate might owe tax

Start by adding up the value of everything you own: your home, vehicles, bank and investment accounts, retirement accounts, life insurance death benefits, business interests, and personal property of significant value. Subtract any debts, such as a mortgage or loans. The result is roughly your taxable estate.

If that number is well below $13.61 million (or $27.22 million if married), you almost certainly will not owe federal estate tax. If it is close to or above the exemption, or if you live in a state with an estate tax, talking to an estate planning attorney or tax professional is worth the cost. They can review your specific situation and suggest strategies tailored to your family and assets.

You do not need to file a federal estate tax return unless your estate exceeds the exemption threshold. However, some estates file anyway to "lock in" the exemption value for that year, which can protect heirs if the IRS later questions the estate's value. Your executor or attorney can advise whether filing makes sense for your situation.

Frequently Asked Questions

Does my state estate tax exemption reduce what I owe in federal tax?

No. State and federal exemptions are separate. If you live in a state with an estate tax, your estate could owe state tax even if it is below the federal exemption, or it could owe federal tax but not state tax. You must check both your state's rules and the federal rules.

If I am married, can my spouse use my unused exemption when I die?

Yes, through a process called portability. If you die first and do not use your full exemption, your spouse can use the unused portion in addition to their own exemption. Your executor must file a federal estate tax return to elect portability, even if no tax is owed. This allows married couples to shelter up to $27.22 million in 2024.

What happens to my exemption if I give away money while I am alive?

Large gifts reduce your exemption dollar-for-dollar. If you give away $1 million during your lifetime, your exemption shrinks by $1 million. However, you can give up to $18,000 per person per year (in 2024) without using any exemption. The rules are complex, and a tax professional can explain how gifts affect your specific situation.

If my estate is below the exemption, do I still need to file a federal estate tax return?

Not required, but sometimes recommended. Filing can "lock in" the value of your estate for that year and protect your heirs if the IRS later questions the value. Your executor or attorney can advise whether filing is worthwhile based on your estate's complexity and size.

Will the exemption really drop in 2026?

Unless Congress changes the law, yes. The current high exemption expires December 31, 2025, and the exemption will fall to roughly $7 million per person starting in 2026. Congress could extend or modify this, but no change is may provide. If your estate is in the range that would be affected, planning now with a professional is prudent.