Crypto estate tax calculator

Inheritance triggers two separate tax events: estate tax (on the decedent's estate if above federal threshold — $13.61M in 2024) and income tax on subsequent gains after step-up-in-basis. Step-up is a major benefit: heirs inherit crypto at fair market value at date of death, wiping out decades of accumulated gains for income-tax purposes.

This calculator estimates federal estate tax, state estate tax (where applicable), and the capital-gains savings from step-up on the inherited crypto. Not a substitute for an estate attorney but useful for planning scale.

The 2026 'sunset' provision is the most urgent planning trigger in crypto estate planning right now. The Tax Cuts and Jobs Act of 2017 doubled the federal estate tax exemption to $13.61M per individual (2024). Without Congressional action, that exemption reverts to approximately $7M (inflation-adjusted from the pre-TCJA $5M baseline) on January 1, 2026. A couple with a $15M estate pays zero estate tax today. In 2026, they could owe $1.6M+ in federal estate tax on the same assets. Anyone with crypto holdings above $7M should be reviewing their estate structure before that date.

Cryptocurrency creates unique access and valuation problems at death that real estate and equities do not. A house is still there when you die. Stock certificates transfer through DTCC systems. Bitcoin in a hardware wallet requires the seed phrase or private key — and if the heir cannot find it, the BTC is effectively gone forever. An estimated 3-4 million BTC are already permanently inaccessible due to lost keys. Proper inheritance planning for crypto means documenting access, not just ownership.

Federal vs state estate tax

Federal exemption: $13.61M per person in 2024 (scheduled to drop to ~$7M in 2026 without Congressional action). Rate above exemption: 40%. State estate tax: only 12 states + DC have one. Notable: NY ($6.94M exemption, up to 16%), MA ($2M, up to 16%), OR ($1M, up to 16%), WA ($2.193M, up to 20%). States with no estate tax: TX, FL, CA, most of the South and Mountain West.

Step-up in basis — the crown jewel

Heirs inherit crypto at fair market value on the date of the decedent's death (or alternate valuation date 6 months later, if elected). This 'steps up' the cost basis from whatever the decedent originally paid. Example: you bought 10 BTC at $5,000 each ($50K basis). You die when BTC is $100,000/coin ($1M value). Your heir's cost basis is $1M, not $50K. If they sell the next day, zero capital gains. If they sell at $1.1M later, they only owe tax on $100K gain.

How to document crypto for your heirs

The single most common failure in crypto estate planning is access documentation, not legal structure. Your heir needs to know: what wallets exist, what hardware devices they are on (Ledger, Trezor, model and PIN), where the seed phrases are stored, which exchanges hold custodial assets, and what two-factor authentication methods are active. A $500,000 BTC position with a seed phrase stored only in the owner's memory is worth $0 to heirs.

Seed phrase storage options: fireproof safe with a copy at a trusted attorney or safety deposit box, metal seed phrase plates (Cryptosteel, Bilodreaux), or a multi-signature arrangement (2-of-3 multisig where one key is with an heir, one with an attorney, one in your control). Never store seed phrases in password managers tied to your accounts — those accounts may become inaccessible immediately upon death due to platform locking.

An 'inheritance letter' stored with your estate documents should include: list of all wallets and exchanges by name, how to access each, what assets each holds, contact info for your crypto-knowledgeable accountant or attorney, and instructions for what to do first (don't panic-sell at inheritance; wait for estate administration to complete). Update this letter at least annually and after any hardware wallet changes or exchange account openings.

Gifting crypto during your lifetime to reduce estate

The annual gift exclusion ($18,000 per recipient in 2024, $36,000 for married couples splitting) allows tax-free transfers of crypto each year. If you have four adult children and gift each $18,000 in BTC annually, you transfer $72,000/year out of your taxable estate with zero gift tax. Over 10 years: $720,000 transferred outside the estate. For estates approaching the federal threshold, systematic gifting is a straightforward reduction strategy.

Warning: gifting appreciated crypto transfers your cost basis to the recipient. If you bought BTC at $10,000 and gift it when worth $100,000, the recipient's basis is your $10,000 — they will owe capital gains on $90,000 when they sell. If they are in a lower tax bracket (0% long-term gains rate applies to the 12% and below income bracket), the gift is a tax-optimization strategy. If they are in the same or higher bracket, dying with the BTC and letting it step up to $100,000 basis is better for the family's total tax bill.

Charitable donations of appreciated crypto are exceptionally tax-efficient. You receive a charitable deduction for the full fair market value at the time of donation, pay no capital gains on the appreciation, and the charity receives the full amount tax-free. Donating $100,000 in BTC bought at $10,000 to a 501(c)(3) saves you the 20% capital gains on $90,000 ($18,000) plus gives you a $100,000 deduction at your ordinary income rate (potentially $37,000 in federal tax savings). Total tax benefit: up to $55,000 vs. a direct cash donation of $100,000.

Multi-signature and trust structures for large crypto estates

For crypto holdings above $1M, a revocable living trust avoids probate — the public, court-supervised process of distributing assets. Probate can take 6-18 months; assets in a trust pass directly to beneficiaries. The trust holds the crypto wallet or exchange accounts as an asset. Cost: $3,000-$10,000 to establish with an estate attorney experienced in digital assets. Without a trust, your executor must go through probate to gain legal authority over your exchange accounts, which can freeze assets for months.

Multi-signature wallets (multisig) are a technical solution to the access problem. A 2-of-3 multisig requires any 2 of 3 designated keys to sign a transaction. Setup: you hold one key, your spouse or trusted family member holds a second, and your attorney or estate trustee holds a third. During your life, you and your spouse manage the wallet. At death, your spouse and the attorney can sign transactions to transfer assets. Neither can act alone, preventing both unilateral theft and access failure.