Alabama Estate
Tax Calculator

Alabama does not impose a state-level estate tax. The state repealed its estate tax in 2005 when the federal state death tax credit was eliminated.

Alabama estates are subject only to the federal estate tax, which applies to estates exceeding approximately **$15 million** per individual for 2025.

Alabama also does not impose a separate inheritance tax. Transfers to beneficiaries — regardless of their relationship to the decedent — are free from state-level transfer taxes.

Alabama residents do not face a separate state transfer tax, though federal estate tax planning remains essential for high-net-worth estates.

With no state estate tax, Alabama residents face only the federal estate tax. The current federal exemption of **$15 million** (2025) is portable between spouses, meaning a married couple can shelter up to $30 million from federal estate tax with proper elections.

The federal tax rate on amounts exceeding the exemption is **40%**.

Alabama's favorable position could change if federal legislation reduces the exemption. The Tax Cuts and Jobs Act exemption is scheduled to sunset after 2025, potentially halving the exemption.

Plan now for both the current and post-sunset environments.

Alabama is a common-law property state, meaning assets are owned individually unless titled jointly. This affects how the estate is valued and which assets are included in the taxable estate.

Review title and beneficiary designations carefully, particularly for retirement accounts and life insurance policies.

Alabama's homestead exemption (up to $15,000 for individuals, $30,000 for families) and personal property exemptions may affect distribution but do not directly impact estate tax calculations. The state's relatively low cost of living means fewer estates reach the federal threshold, but agricultural land, timber tracts, and family businesses can push estate values higher than expected.

Even without a state estate tax, Alabama estates may face federal estate tax exposure. Use this estimator to evaluate federal liability and identify planning opportunities — free for all 50 states and DC.

Because Alabama does not impose a state estate tax, the federal estate tax is the only transfer tax layer. The current federal exemption of $15 million per individual (2025) shelters the vast majority of estates.

However, estates that exceed this threshold face a top marginal rate of 40%, making federal planning essential for high-net-worth Alabama residents.

The Tax Cuts and Jobs Act (TCJA) doubled the federal exemption effective 2018, but this increase is scheduled to sunset after 2025. If Congress does not act, the exemption will revert to approximately $7 million (adjusted for inflation).

For Alabama residents with estates between $7 million and $15 million, this sunset creates a planning window: transfers made now under the higher exemption will not be clawed back, even if the exemption later decreases.

The absence of a state estate tax in Alabama simplifies the analysis — there is no gap between state and federal exemptions to navigate, no separate state return to file, and no risk of double taxation. However, this also means there is no state-level deduction to offset federal liability.

Federal planning tools — marital deductions, charitable deductions, and the unified credit — carry the full weight of estate tax mitigation. Use the Alabama estate tax calculator to model current and post-sunset scenarios, and review the Alabama probate cost calculator to understand full settlement costs.

Federal portability allows a surviving spouse to inherit the deceased spouse's unused estate tax exclusion (DSUE), effectively doubling the available federal exemption to $30 million for married couples. Electing portability requires filing Form 706 for the first-to-die spouse, even if no federal estate tax is owed — a step that is frequently overlooked when no tax appears to be due.

Because Alabama does not impose a state estate tax, there is no state-level portability concern. The federal election is the only one that matters, and it applies automatically to the surviving spouse's estate once made.

This is simpler than in estate-tax states, where the lack of state portability forces the use of bypass trusts to preserve both exemptions.

Despite this simplicity, portability has limitations. The DSUE amount is not indexed for inflation — it locks in at the value of the first spouse's unused exemption at the date of death.

If the surviving spouse remarries and the new spouse dies, the DSUE from the first spouse is lost. For Alabama families with significant wealth, bypass trusts may still be preferable to portability because they provide asset protection, generation-skipping benefits, and inflation-adjusted growth outside the surviving spouse's taxable estate.

Use the executor fee calculator and probate cost calculator to understand the full administration picture when comparing trust structures.

Without a state estate tax, Alabama residents focus planning efforts on the federal layer. The current $15 million exemption provides substantial shelter, but the scheduled TCJA sunset makes it prudent to accelerate planning.

Irrevocable trusts — including ILITs, SLATs, and QPRTs — remove assets from the taxable estate permanently. Once transferred, these assets and their future appreciation are outside the federal estate, regardless of future exemption changes.

Annual exclusion gifts of $19,000 per recipient (2025) remain the simplest estate reduction tool. Married couples can jointly gift $38,000 per recipient through gift-splitting.

Over a decade, a family gifting to four beneficiaries annually removes $1.44 million from the estate with no gift tax return required. Charitable deductions — whether through outright bequests, donor-advised funds, or charitable trusts — further reduce the taxable estate while supporting philanthropic goals.

GRATs and GRUTs (grantor retained unitrusts) transfer appreciation to beneficiaries at minimal transfer tax cost. For Alabama residents holding concentrated stock positions or rapidly appreciating assets, these vehicles are particularly efficient.

Family limited partnerships and LLCs may provide valuation discounts for gift and estate tax purposes, though the IRS scrutinizes these structures closely. Professional valuation and proper documentation are essential.

Model your federal exposure with the Alabama estate tax calculator, or find an estate planning attorney in Alabama for personalized guidance.