Glossary

Estate tax

A federal tax on the transfer of a large estate at death, applying only above a high exemption threshold.

Also called: death tax, inheritance tax, transfer tax

The estate tax is a tax on the value of a person's property transferred at death. At the federal level, it applies only to estates above a large exemption amount, which has been raised substantially in recent years, so only a small fraction of estates owe anything. The exemption is adjusted for inflation, and amounts above it are taxed at a top rate of 40 percent. Some states also levy estate or inheritance taxes at lower thresholds.

Opponents use the name "death tax" and argue that it taxes wealth that has already been taxed, forces the sale of family farms and businesses and encourages costly planning. Supporters argue that it is a progressive source of revenue, limits the concentration of wealth across generations and affects very few heirs. Studies show that few farms and small businesses actually owe the tax because of exemptions and provisions allowing payment over time.

Congress has repeatedly altered the tax: it was repealed for 2010 and has been restored with a high exemption. Related rules include the gift tax, trusts and the stepped-up basis under the capital gains tax. Philosophically, it relates to debates on private property and inheritance, as well as the idea of a wealth tax. Many conservatives favor repeal, while many liberals favor lowering the exemption.

Last reviewed November 8, 2026

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Related terms

Capital gains tax A tax on the profit from selling an asset such as stocks, real estate or a business for more than its purchase price. Progressive tax A tax whose rate rises as the taxpayer's income or wealth rises, so higher earners pay a larger share. Wealth tax A recurring tax on the total net worth of individuals above a threshold, rather than on their annual income. Tax expenditure A provision of the tax code, such as a deduction or credit, that reduces tax owed to encourage a behavior, functioning like government spending. Private property The right of individuals and organizations to own, use, exchange and exclude others from assets, a pillar of market economies.