2023 Estate Tax Exemption Amount Increases

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The 2023 estate tax exemption amounts have been announced and the estate tax exemption amounts are going up again. The amount is adjusted each year for inflation, so that's not a surprise. But it's still a big deal when the new exemption is announced each year because there's a lot at stake for certain high-income Americans.

2023 Estate Tax Exemption

Generally, when you die, your estate is not subject to the federal estate tax if the value of your estate is less than the exemption amount. For people who pass away in 2023, the exemption amount will be $12.92 million (it's $12.06 million for 2022). For a married couple, that comes to a combined exemption of $25.84 million.

Estate Tax Rate

As you might guess, only a small percentage of Americans die with an estate worth $12.92 million or more. But for estates that do, the federal tax bill is pretty steep. Most of the estate's value is taxed at a 40% rate.

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As the table below shows, the first $1 million is taxed at lower rates – from 18% to 39%. That results in a total tax of $345,800 on the first $1 million, which is $54,200 less than what the tax would be if the entire estate were taxed at the top rate. However, once you get past the first $1 million, everything else is taxed at the 40% rate.

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Rate	Taxable Amount (Value of Estate Exceeding Exemption)
18%	$0 to $10,000
20%	$10,001 to $20,000
22%	$20,001 to $40,000
24%	$40,001 to $60,000
26%	$60,001 to $80,000
28%	$80,001 to $100,000
30%	$100,001 to $150,000
32%	$150,001 to $250,000
34%	$250,001 to $500,000
37%	$500,001 to $750,000
39%	$750,001 to $1 million
40%	Over $1 million

Historical Estate Tax Exemption Amounts

Since the federal estate tax was reformed in 1976, the estate tax exemption has only gone up (see table below). In most cases, the increase is modest, such as a simple adjustment for inflation. However, at times, the exemption amount has jumped considerably. For example, it shot up from $675,000 to $1 million in 2002, from $1 million to $5 million in 2011, and from $5.49 million to $11.18 million in 2018.

But that pattern is scheduled to change. The 2018 estate tax examption increase is only temporary, so the base exemption amount is set to drop back down to $5 million (adjusted for inflation) in 2026.

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Period	Exemption Amount
1977 (Quarters 1 and 2)	$30,000
1977 (Quarters 3 and 4)	$120,667
1978	$134,000
1979	$147,333
1980	$161,563
1981	$175,625
1982	$225,000
1983	$275,000
1984	$325,000
1985	$400,000
1986	$500,000
1987 through 1997	$600,000
1998	$625,000
1999	$650,000
2000 and 2001	$675,000
2002 through 2010	$1,000,000
2011	$5,000,000
2012	$5,120,000
2013	$5,250,000
2014	$5,340,000
2015	$5,430,000
2016	$5,450,000
2017	$5,490,000
2018	$11,180,000
2019	$11,400,000
2020	$11,580,000
2021	$11,700,000
2022	$12,060,000
2023	$12,920,000

State Estate Taxes

Just because your estate isn't hit with the federal estate tax, that doesn't necessarily mean you're completely off the hook. Your estate might be subject to a state estate tax. Twelve states and the District of Columbia impose their own estate tax, and the state exemption amounts are often much lower than the federal estate tax exemption. For instance, the exemption amount in Massachusetts and Oregon is only $1 million.

Plus, six states levy an inheritance tax, which is paid directly by your heirs. (Maryland has both an estate tax and an inheritance tax!) So, just because your estate isn't worth millions of dollars, you children and grandchildren might end up with less in their pockets when you die than what you're expecting.

Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.