The tax levied on estates of wealthier Americans upon death brings in a relatively small amount of money — about $13.2 billion in 2019, less than one one-hundredth of what was raised through individual income taxes ($1.7 trillion). But the estate tax fuels passions on both sides of America’s political divide at a level far in excess of the dollar figures. President Joe Biden wants to give more teeth to the tax on multimillion-dollar estates and is expected to propose raising the rate while cutting the amount that wealthy families can pass on to heirs tax-free by more than half.
1. How does the estate tax work?
The tax applies to the transfer of property — cash and securities, real estate, insurance, trusts, annuities and business interests — at death. The vast majority of Americans fall far short of the wealth required to trigger the tax; for those who do meet those thresholds, the tax can reach 40%. The 2017 tax overhaul that was President Donald Trump’s signature legislative achievement doubled the amount that wealthy people can pass to their heirs tax-free. In 2021, an individual can leave $11.7 million to heirs without the estate tax kicking in; for a married couple, that amount doubles. The estate tax changes in the 2017 law are set to expire at the end of 2025.
2. How many Americans does this effect?
In 2019, the latest year for which IRS data is available, 2,570 estates paid any tax, fewer than one out of every 1,000 people who died. The data come from estate tax returns filed in 2019, which typically correspond to 2018 deaths.
Read More at Bloomberg.com
