Estate tax

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Playing the wealth transfer game? Uncle Sam wants in.

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An estate tax is a levy on the value of property changing hands at the death of the owner—such as cash, investments, real estate, and other assets—fixed mainly by reference to its total value. Estate tax is generally applied only to estates evaluated above a statutory amount and is applied at graduated rates. Estate tax is usually easier to administer than inheritance tax levied on beneficiaries, because only the value of the entire estate must be determined.

The estate tax was first instituted in Great Britain in 1889 as part of a broad death tax program. It was first imposed in the United States in 1898 to help finance the Spanish-American War, was repealed in 1902, and was reimposed in 1916 to help finance mobilization for World War I.

In most countries death is considered a taxable event, with justification for such taxes standing on legal and social grounds. Legally, the tax can be understood as a fee for the privilege of passing property to heirs and beneficiaries after death. Socially, the tax tends to reduce inequalities in the distribution of wealth and provides an opportunity to break up large estates.

In the United States, death-related taxes can generate revenue for state governments through inheritance taxes, or for the federal government through the estate tax. Even so, these taxes account for a relatively small share of public revenue, and their importance has declined compared with income, sales, and excise taxes.

That limited revenue impact reflects, in part, the high federal estate tax exemption, which rose to $13.9 million in 2025 and $15 million in 2026 under the Tax Cuts and Jobs Act of 2017 and subsequent legislation, including the One Big Beautiful Bill Act of 2025.

Various means have been used to reduce exposure to the estate tax, including lifetime gifts, generation-skipping transfers, and the use of irrevocable and charitable trusts that limit retained interests in property. Critics of the estate tax, sometimes referred to as a “death tax,” have argued that it can force the sale of closely held farms and family businesses, because the tax is based on the value of the estate rather than the liquidity of its assets. In response, estate tax laws have included provisions intended to ease this burden when estates include significant non-cash or difficult-to-value assets, or when ownership of a business is intended to remain within the decedent’s family.