What is Estate Tax

While only six states currently have estate tax, California is not one of them. California is not subject to state level estate tax, but it is still subject to federal estate tax. Estate tax is basically a tax on your right to transfer property at your death. Your estate may consist of cash and securities, real estate, insurance, trusts, annuities, business interests, and other assets. In most states, including California, you do not pay taxes to the state on the value of the estate being transferred, but you do pay taxes to the federal government.

How are Federal Estate Taxes Calculated and what is Exempt?

When it comes to the federal estate tax rates not every estate is required to pay it. If your estate is under a certain threshold, then it is exempt from being taxed at the federal level. In 2022 the personal estate tax exemption rate was $12.06 million per person and will increase in 2023 to $12.92 million per person. When someone dies, if their estate is valued at less than the threshold, they are excluded from paying the federal estate tax. The numbers, however, change for a married couple. For a married couple the 2022 amount was $24.12 million and the amount for 2023 has increased to $25.84 million.  What all of this means is that you can transfer $25.84 million to your heirs without paying any estate taxes.

Federal Estate Tax Rates

The rate at which you pay estate tax is determined by how much the amount is over $12.92 million. The amount over $12.92 million determines what tax bracket the estate falls into.

Ex. If your estate is valued at $12.93 million (10,000 over), then the tax rate is 18%. The rates for estate tax are listed below:

Taxable Amount Estate Tax rate What Your Estate Would Pay
$0- $10,000 18% -$0 base tax

-18% on taxable amount

$10,001- $20,000 20% -$1,800 base tax

-20% on taxable amount

$20,001- $40,000 22% -$3,800 base tax

-22% on taxable amount

$40,001- $60,000 24% -$8,200 base tax

-24% on taxable amount

$60,001- $80,000 26% -$13,000 base tax

-26% on taxable amount

$80,001- $100,000 28% -$18,200 base tax

-28% on taxable amount

$1000,001- $150,000 30% -$23,800 base tax

-30% on taxable amount

$150,001- $250,000 32% -$38,800 base tax

-32% on taxable amount

$250,001- $500,000 34% -$70,800 base tax

-34% on taxable amount

$500,001- $750,000 37% -$155,800 base tax

-37% on taxable amount

$750,001- $1,000,000 39% -$248,300 base tax

-39% on taxable amount

$1,000,000+ 40% -$345,800 base tax

-40% on taxable amount

If you have any questions or want to learn more about estate tax and or want to learn about estate planning click the link below.