Estate taxes are due when someone of significant net worth dies. There is a Federal Estate Tax system and some states, but not all, have their on State Estate Tax system. Federal estate tax rates are extremely high at 40% and the States are more of a marginal system varying from 8% to 16%. The Estate Tax system is often called the death tax, but only affects very few individuals in America.
The question I hear the most when I am teaching classes are, where do you think the Estate Taxes are going? I always respond, they aren’t disappearing. Period. The current administration (along with the last one) is running through money like it was beer at a keg party! So is it likely that we are going to cut a tax that only affects the top 2 to 4% of the Country? NO WAY.
Bills Proposed by Congress for the Estate Tax
I cam across a great article on NACS Online titled, Deadline Looms on Estate Tax, which succinctly highlights the bills out there,
- H.R. 436 – Rep. Earl Pomeroy (ND-at large): Makes the current exemption of $3.5 million and the rate of 45% permanent. (Estates between $10 million and $23.5 million would be taxed at 50%.).
- H.R. 96 – Rep. Michael Conaway (TX-11): Increases to $1.85 million the maximum reduction amount for alternative valuations of farmland and other business property for estate tax purposes; and restores after 2009 the estate tax deduction for family-owned business interests and increase such deduction to $2 million. Allows annual inflation adjustments to such increased amounts after 2010.
- H.R. 173 – Rep. John Salazar (CO-3): Excludes from an individual’s estate farmland so long as the land continues to be used for farming. To exclude such farmland from the total estate, the individual must have earned 50% of their gross income from farming in at least 3 of the 5 years from the individual’s last tax year and during 5 of the 8 years prior to the individual’s death the land must have been used for farming. If the land is subsequently sold or no longer used for farming a tax will be applied on the heirs.
- H.R. 205 – Rep. Mac Thornberry (TX-13): Repeals the federal estate, gift and generation-skipping transfer taxes.
- H.R. 498 – Rep. Harry Mitchell (AZ-5): Restores the unified credit against gift tax liability; provides for annual increases in the estate tax exclusion amount between 2010 and 2015 and establishes a permanent exclusion amount of $5 million for 2015 and thereafter; provides for an inflation adjustment to the estate tax exclusion amount after 2015; reduces estate tax rate brackets; and allows a surviving spouse to use the unused unified estate tax credit of a deceased spouse.
- H.R. 2023 – Rep. Jim McDermott (WA-7): Sets a $2 million per-person exemption, indexed for inflation, and imposes a 55 percent top rate.
- H.R. 3524 – Rep. Mike Thompson (CA-1): Prevents the value of inherited farmland from being subject to the estate tax if the decedent’s family continues to own it and farm it.
I am not sure I understand the obsession with farmland! It is a business like any other business, except…oh yeah, it already gets a ton of tax breaks and subsidies.
Regardless, I think we are going to end up with the current system either frozen at today’s Credit Shelter Amounts or a little bit higher.