What is my estate’s value for federal taxation?

Federal estate taxes are for those with very high-valued estates. Anyone who has significant assets should plan ahead to pay these taxes.

The IRS handles the collection and sets the rules for how to value your estate, which will let you know if you will have to pay.

Fair market value is key

The IRS bases your estate value on the fair market value of your assets. The fair market value is how much the asset would be worth if sold upon your death. It does not factor in the cost to purchase new or the overall value of it based on your related expenses.

Adjustments to your estate

While figuring the fair market value of all your assets and totaling that will give you your estate’s value, it is not the figure the IRS will use. You will first need to take the deductions available.

You can reduce your estate value by deducting non-taxable items, such as estate administration costs and business operating costs. You also may deduct gifts since they are not taxable.

The IRS will provide you a unified credit, as well, which reduces the value further.

If your final estate value after deductions is under $12,920,000 in 2023, then you will not owe estate taxes at the federal level.

Note that the IRS threshold for estate value changes annually. Your estate administrator will need to check what it is at your time of death. In addition, you cannot value your estate until your death, so that is also something your administrator must handle.