Estate Tax Exemption: How Much It Is and How to Calculate It

Not every estate owes estate tax. For 2026, the federal estate tax exemption is $15 million per person, according to the IRS. Maryland has separate estate tax rules. That means Maryland families may still need to plan, even if they are below the federal limit.

Here’s how the exemption works and how to estimate whether estate tax may apply.

What Is the Estate Tax Exemption?

The estate tax exemption is the amount a person can pass on after death before estate tax applies. If the estate is below the exemption, federal estate tax is usually not due. If the estate is above the exemption, tax may apply only to the amount over the limit. For married couples, portability may allow a surviving spouse to use a deceased spouse’s unused federal exemption. But portability is not automatic. A federal estate tax return usually must be filed on time to make that election.

Federal vs. Maryland Estate Tax

Maryland families should look at both federal and state estate tax rules.

Federal estate tax:
For 2026, the federal exemption is $15 million per person.

Maryland estate tax:
Maryland has its own estate tax exemption, which is lower than the federal exemption.

The Maryland Comptroller explains that a Maryland estate tax return may be required when the estate meets or exceeds the Maryland exemption amount.

Maryland estate tax is generally due nine months after the date of death.

Maryland also has an inheritance tax. This is separate from estate tax.

The inheritance tax depends on who receives the property. Many close family members are exempt.

What Counts Toward an Estate?

An estate can include more than a house or bank account.

The IRS says the gross estate may include real estate, cash, securities, insurance, trusts, annuities, business interests, and other assets.

Common examples include:

• Real estate
• Bank accounts
• Investment accounts
• Retirement accounts
• Business interests
• Life insurance proceeds in some cases
• Annuities
• Trust assets in some cases
• Jointly owned property
• Personal property, such as vehicles, jewelry, art, or collectibles

The estate is usually valued using the fair market value on the date of death.

That is not always the original purchase price.

For example, a home bought years ago may now be worth much more.

How to Calculate Whether Estate Tax May Apply

You can start with four basic steps.

1. Add Up the Gross Estate

List everything the person owned or had an interest in at death. Include both probate and non-probate assets. Probate assets go through the court process. Non-probate assets may pass through a beneficiary designation, joint ownership, or trust.

But avoiding probate does not always mean avoiding estate tax. Some non-probate assets may still count toward the estate.

2. Use Fair Market Value

Next, estimate the fair market value of each asset. Cash accounts are usually simple. Real estate, businesses, collectibles, and unique property may need an appraisal.

The Maryland Comptroller notes that estate property values must be based on an appraisal from a certified appraiser.

3. Subtract Allowable Deductions

Some deductions may reduce the taxable estate.

These may include:

• Mortgages
• Debts
• Estate administration expenses
• Certain property passing to a surviving spouse
• Certain charitable gifts
• Other allowed deductions

This step can make a big difference.

It is especially important for larger estates, business owners, blended families, or estates with property in more than one state.

4. Compare the Estate to the Exemption

After deductions, compare the estate value to the exemption.

Example:

If someone dies in 2026 with a taxable estate of $12 million, the estate is below the $15 million federal exemption. Federal estate tax may not be due. But Maryland estate tax may still need to be reviewed. If someone dies with a taxable estate of $18 million, the estate is above the federal exemption.

The amount over the exemption may be subject to federal estate tax. Maryland estate tax may also apply.

Why Estate Tax Planning Still Matters

Many estates will not owe federal estate tax.

But planning can still matter.

Asset values can grow over time.

Maryland’s exemption is also lower than the federal exemption.

Estate planning is not only about taxes.

A good plan can help reduce probate issues, protect family members, avoid conflict, and make things easier for loved ones.

Ways to Reduce Estate Tax Exposure

Estate tax planning may include:

• Lifetime gifting
• Trust planning
• Charitable giving
• Marital deduction planning
• Business succession planning
• Life insurance planning
• Reviewing beneficiary designations
• Updating old wills or trusts
• Planning for Maryland estate and inheritance tax

The right strategy depends on your assets, family, goals, and state of residence.

What works for one family may not work for another.

When Should You Review Your Estate Plan?

You may want to review your estate plan if:

• Your estate is near or above Maryland’s exemption
• You own real estate in multiple states
• You own a business
• You have a blended family
• You recently married or divorced
• You lost a spouse
• You have minor children
• Your assets have grown
• Your plan is several years old
• You are unsure whether your will or trust still fits your wishes

Estate tax laws can change.

Your family and finances can change too.

An old plan may no longer protect you the way you intended.

Talk With a Maryland Estate Planning Attorney

Estate tax is not just about numbers.

Your documents, beneficiaries, asset ownership, and state rules all matter.

At DK Law Group, we help Maryland families understand how estate tax rules may affect their estate plan.

We can also help you explore ways to protect more of what you have built.

If you are unsure whether your estate may be taxable, we can help you review your options.

To speak with DK Law Group, call (443) 739-6724 or email diana@dklawmd.com.