New 2025 Estate Tax Exemption Announced
The IRS just increased the exemption as we enter what could be the final year of the TCJA.
The federal estate tax exemption is going up again for 2025. Though, the higher IRS inflation-adjusted number may not come as a surprise to most.
However, 2025 will be a pivotal tax year. If the Tax Cuts and Jobs Act (TCJA) is left to expire, as of 2026, the estate exemption amount could revert to a lower base threshold.
In the meantime, a higher exemption for 2025 will save more estates from federal tax, which may save heirs the heartache of a higher tax bill.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
2025 estate tax exemption
The federal estate tax doesn’t apply unless you hit a certain exemption amount.
- The exemption amount for people who pass away in 2025 is $13.99 million (up from $13.6 million last year).
- Married couples can expect their exemption to be $27.98 million (up from $27.22 million last year).
Federal estate tax rate
Only a certain percentage of estates will be subject to the federal estate tax. This is because the exemption is high for 2025.
However, estates valued over the tax amount will be taxed at a pretty hefty rate, with those exceeding more than $1 million ($14,990,000 or $28,980,000 combined for married couples) taxed at 40%.
Below is how much heirs can expect to pay based on an estate’s value:
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% | More than $1 million |
Does the estate tax expire in 2025?
If Congress doesn't act, the estate tax exemption is due to sunset at the end of 2025. At that time, amounts will drop to a base of $5 million (adjusted for inflation) in 2026. However, the exemption is indexed for inflation.
This means that, even if key TCJA provisions expire, the estate tax exemption will adjust yearly for inflation.
Once more, most tax-free gifts made before the lifetime gift and estate tax exemption drops won’t trigger higher tax bills in 2026 and beyond.
Period | Exemption Amount |
2018 | $11,180,000 |
2019 | $11,400,000 |
2020 | $11,580,000 |
2021 | $11,700,000 |
2022 | $12,060,000 |
2023 | $12,920,000 |
2024 | $13,610,000 |
2025 | $13,990,000 |
State estate taxes
Some states may impose an estate tax of their own (and the exemption amounts aren’t always as generous as the federal estate tax exemption).
For instance, in Massachusetts, the state estate tax exemption is just $2 million and isn’t indexed for inflation.
A few states also impose an inheritance tax, which can leave a tax bill for your heirs on even small amounts of money.
Nebraska, for example, imposes an inheritance tax on adult children when their inheritances exceed $100,000. In Kentucky, nephews and nieces only receive a $1,000 exemption.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Kate is a CPA with experience in audit and technology. As a Tax Writer at Kiplinger, Kate believes that tax and finance news should meet people where they are today, across cultural, educational, and disciplinary backgrounds.
-
Kiplinger Outlook: Telecom Companies Brace for Tough Times
The Letter The telecom industry is entering a new era that threatens profitability. But the coming Trump administration will make it easier for the major players to adjust.
By John Miley Published
-
What Does the Trump Presidency Mean for the Fed?
We take a look at what Donald Trump's potential economic plans could mean for inflation, the Fed and Jerome Powell. Here's what you need to know.
By Charles Lewis Sizemore, CFA Published
-
How Women Can Navigate Competing Priorities as They Age
It takes planning and some frank conversations, but women can aim for a happy and financially secure retirement while supporting loved ones. Here's how.
By Steph L. Wagner Published
-
Medicare Premiums 2025: IRMAA for Parts B and D
Medicare participants with an income above the threshold must pay a surcharge for Medicare Part B and Part D based on their income.
By Donna LeValley Published
-
Want Your Kids to Inherit? You Need an Asset Protection Plan
You've worked hard for your wealth. Don't let it fall into the wrong hands. Consider prenups, trusts and other protections to safeguard your family legacy.
By Tracy Craig, Fellow, ACTEC, AEP® Published
-
Nevada Approves Diaper Tax Relief Amid Childcare Crisis
Tax Relief Nevada voters have expanded sales tax relief to diapers. But are prices still too high?
By Kate Schubel Published
-
Five Tax Strategies to Help Your Money Last in Retirement
Having a tax strategy is crucial to making your money last. These tax-saving moves can help, whether you're years from retirement or already there.
By Scott M. Dougan, RFC, Investment Adviser Published
-
IRS Updates Capital Gains Tax Thresholds for 2025
Capital Gains For the 2025 tax year, the IRS has increased the capital gains tax income thresholds. Here's what you need to know.
By Kelley R. Taylor Last updated
-
Earned Income Tax Credit (EITC) 2024: How Much Will You Get?
Tax Credits The refundable amount for workers with or without children is slightly higher this year. Here’s what you need to know.
By Gabriella Cruz-Martínez Last updated
-
457 Plan Contribution Limits for 2025
Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025 than in 2024.
By Donna LeValley Published