California Estate Tax Calculator

How Federal Estate Tax Works After OBBBA

Under OBBBA, the federal estate tax exemption is roughly $15 million per individual and about $30 million per married couple. The exemption has no scheduled sunset. Inflation indexing begins in 2027. Estates at or below the exemption generally owe no federal estate tax. Estates above it are generally taxed at a flat 40 percent on the excess.

• Federal estate tax applies under IRC section 2001. It reaches the taxable estate of any decedent who was a U.S. citizen or resident.
• The unified credit under IRC section 2010 effectively exempts the first roughly $15 million. Couples can shelter about $30 million using portability or credit-shelter planning.
• The marital deduction under IRC section 2056 allows unlimited tax-free transfers to a U.S. citizen surviving spouse.
• The annual gift tax exclusion under IRC section 2503(b) is $19,000 per recipient per year (2025 and 2026, per IRS Rev. Proc. 2025-32). Annual exclusion gifts do not reduce your lifetime exemption. The IRS explains the annual gift tax exclusion in more detail.
• Portability under IRC section 2010(c) lets a surviving spouse use the deceased spouse’s unused exemption (DSUE). The executor preserves it by filing Form 706 within 9 months of death (15 months with extension), even when no tax is otherwise owed.

Want the underlying numbers and how they adjust? See our companion guide to the federal estate tax exemption amount, or review the IRS overview of the federal estate tax.

Why California Has No State Estate Tax

California repealed its inheritance and gift tax by voter initiative in 1982. California also had a pickup estate tax tied to the federal credit for state death taxes under former IRC section 2011. That tax became inoperative for deaths after December 31, 2004. Today, California families generally pay only federal estate tax. There is no California pickup estate tax, no estate transfer tax, and no inheritance tax.

The federal credit for state death taxes lived under former IRC section 2011. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) phased out that credit over 2002 through 2004. A deduction replaced it beginning in 2005. Because California’s pickup tax was tied to the federal credit, it became inoperative for deaths after December 31, 2004.

California’s separate inheritance and gift tax had already ended by voter initiative in 1982. These are two distinct events.

Some states still impose their own estate or inheritance tax. As of the last-verified date, that list includes Washington, Oregon, Minnesota, Illinois, New York, Massachusetts, Maryland, Connecticut, Vermont, Hawaii, Rhode Island, Maine, and the District of Columbia. State regimes change over time. If the decedent owned real property in one of those states, that state may tax the property regardless of where the decedent lived.

The Step-Up in Basis Benefit (IRC section 1014)

When you inherit appreciated property, your tax basis generally steps up to its fair market value on the date of death (IRC section 1014). This step-up erases the unrealized gain that built up during the decedent’s life. For California families holding long-appreciated real estate or stock, the step-up is often the single most valuable feature of the federal transfer tax system.

In our experience, this matters most for San Diego County families who bought homes decades ago. Here is how it plays out.

A parent buys a Carlsbad home in 1985 for about $200,000. At the parent’s death, the home is worth roughly $2,500,000. The child inherits with a stepped-up basis of about $2,500,000. If the child then sells for about $2,500,000, there is generally no capital gains tax.

Now compare a lifetime sale. If the parent had sold during life, the roughly $2,300,000 gain would have triggered tax. Federal tax at the 23.8 percent rate (long-term capital gains plus net investment income tax) would run about $547,000. California income tax at the 13.3 percent top rate would add roughly $306,000. The estimated combined federal-and-state exposure is about $853,000.

• Strategic implication: holding appreciated assets until death often beats lifetime gifting, even with a high exemption.
• The step-up does not apply to tax-deferred retirement accounts like IRAs and 401(k)s. Those keep the decedent’s basis and pass as ordinary income to beneficiaries. Most non-spouse beneficiaries also face the SECURE Act 10-year payout rule.

Worked Examples

These three scenarios show how the calculator treats common California estates. All figures assume no prior taxable gifts.

Scenario 1 covers most California families. The estimated federal estate tax is zero, and the step-up in basis preserves the full value for heirs.

Scenario 2 sits $5,000,000 over the exemption. The 40 percent tax on that excess is about $2,000,000.

Scenario 3 is a married couple preserving both $15,000,000 exemptions. Portability or credit-shelter planning shelters $30,000,000 of the $40,000,000 estate. The 40 percent tax on the remaining $10,000,000 is about $4,000,000.

What This California Estate Tax Calculator Does Not Estimate

This tool estimates federal estate tax under current OBBBA rules. It does not estimate the items below.

• Generation-skipping transfer (GST) tax: a separate 40 percent tax under IRC sections 2601 through 2664 on certain transfers to grandchildren and other skip persons.
• Prior taxable gifts: gifts that reduce your remaining exemption. The calculator assumes $0 in prior taxable gifts unless you enter otherwise.
• Illiquid asset discounts: lack of marketability, lack of control, and fractional-interest discounts that can lower the taxable value of closely held interests.
• Alternate valuation date election: the option under IRC section 2032 to value the estate 6 months after death if values have dropped.
• Charitable deduction: the unlimited deduction under IRC section 2055 for transfers to qualified charities.
• Marital deduction nuances: QTIP trusts and qualified domestic trusts for non-citizen spouses under IRC section 2056A.
• State estate tax: tax owed on property located in the 12 states plus DC that impose their own estate or inheritance tax.
• GST exemption: the separate exemption of roughly $15 million under IRC section 2631.

For estates above the exemption, these items can shift the analysis a great deal. The calculator’s number is a starting point for the conversation, not the final answer.

10 Strategies for High Net Worth Families Above the Exemption

Does your estate exceed the roughly $15 million or $30 million exemption? Planning can lower the 40 percent exposure. Our work in estate planning for high net worth estates centers on the ten strategies below. The planning guide above covers each one in depth.

• Annual exclusion gifting (IRC section 2503(b)): give $19,000 per recipient per year, with no use of your lifetime exemption.
• Spousal Lifetime Access Trust (SLAT): uses current exemption while preserving indirect access for a spouse.
• Grantor Retained Annuity Trust (GRAT): leverages low IRC section 7520 rates for tax-efficient transfers.
• Qualified Personal Residence Trust (QPRT): transfers a primary or vacation home at a discounted gift value.
• Irrevocable Life Insurance Trust (ILIT): an irrevocable life insurance trust removes policy proceeds from the taxable estate.
• Charitable Remainder Trust (CRT) under IRC section 664: income for life, a charitable deduction, and no estate inclusion of the remainder.
• Charitable Lead Trust (CLT): charity receives the income interest, and the remainder passes to family.
• GST dynasty trust: uses the roughly $15 million GST exemption for multi-generational transfers.
• Family limited partnership or LLC: entity-level valuation discounts with centralized management.
• Credit-shelter / A-B trust planning: preserves both spouses’ exemptions, even when no portability election is made.

Each strategy carries trade-offs and needs individualized analysis. Owen’s LL.M. in Taxation supports coordinating these tools with your broader estate plan.

When to Talk With a California Estate Tax Attorney

In our experience working with San Diego County families, a few situations call for a closer look. Consider speaking with a California estate tax attorney if any of these apply to you.

• Your gross estate approaches roughly $10 million individual or $20 million couple. Count real estate, investments, retirement accounts, business interests, and life insurance.
• You own closely held business interests, LLCs, or partnership interests.
• You hold appreciated property and are weighing a gift now versus holding until death.
• You have grandchildren or other generation-skipping beneficiaries.
• You have made prior taxable gifts that reduced your remaining exemption.
• You own real property in another state that imposes its own estate tax.
• You have a non-U.S.-citizen spouse and want the marital deduction, which generally requires a QDOT.
• You own substantial life insurance in your own name, where an ILIT may help.

Our San Diego estate planning attorney team helps families across Carlsbad and San Diego County plan with clarity. Schedule a free estate planning consultation in Carlsbad.