[COLUMN] Estate tax rate changes

Biden tax plan series

WHAT Is an Estate Tax?

An estate tax is a levy on estates whose value exceeds an exclusion limit. Only the amount that exceeds that minimum threshold is subject to tax. This tax is calculated based on the estate’s fair market value (FMV) at time of death, not what the deceased originally paid for its assets. The tax is levied by the state in which the deceased person was living at the time of death. In summary:

  • The estate tax is a financial levy on an estate, based on the current value of its assets.
  • Federal estate taxes are levied on assets in excess of a certain amount.
  • Assets transferred to spouses are exempt from estate tax.

Current Tax Law:

  • The current unified gift and estate tax exemption is $11.7 million per person.
  • The top estate tax rate is 40% for estates valued at a larger amounts.

Proposed Tax Changes:

  • Proposed laws would retain the current estate and gift tax rules.
  • Another proposal would establish a progressive taxation system for estates transferred at death:
  • Estates valued at death of $0 to $3.5 million would be taxed at a rate of 0%
  • Estates valued at death of $3.5 to $10 million would be taxed at a rate of 45%
  • Estates valued at death of $10 to $50 million would be taxed at a rate of 50%
  • Estates valued at death of $50 to $1 billion would be taxed at a rate of 55%
  • Estates valued at death of more than $1 billion would be taxed at 65% (applies to most of us).
  • Note: Earnings that were already taxed when earned during lifetime, will get taxed again upon death. Sad.

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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.

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He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies.  He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to vicsy@live.com.

 

Victor Sy, CPA, MBA (retired)

Victor Santos Sy, MBA. CPA (Retired) Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation. * * * He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to vicsy@live.com.

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