History of the Federal Estate Tax

Posted on: May 18, 2017
Tags: Wiils, Trusts, Estate Planning, Cincinnati, Ohio, Kentucky, Wealth Management

Federal Estate Tax History.

An estate tax is a tax levied on an heir's inherited portion of an estate if the value of the estate exceeds an exclusion limit set by law.  The estate tax is mostly imposed on assets left to heirs, but it does not apply to the transfer of assets to a surviving spouse.  The right of spouses to leave any amount to one another is known as the "unlimited marital deduction."  The amount a decedent can leave to a beneficiary tax free has changed drastically over the years and sits at $5,490,000 today.   The various laws and exclusion amounts can be found below:

a. Tax Reform Act of 1976 - Unified Estate and Gift Tax into one tax
YEAR    EXEMPTION
1977    $120,667
1978    $134,000
1979    $147,333
1980    $161,563 INCREASE OF $41,000

b. Economic Recovery Tax Act of 1981
1981    $175,625
1982    $225,000
1983    $275,000
1984    $325,000 INCREASE OF $150,000
1985    $400,000
1986    $500,000
1987-1997    $600,000 (10 years)
INCREASE OF 275,000

c. Taxpayer relief act of 1997
1998    $625,000
1999    $650,000
2000-2001    $675,000 INCREASE OF $75,000

d. Economic Growth and Tax Relief Reconsilation Act of 2001-
2002-2003    1Million INCREASE OF $325,000
2004-2005    1.5 Million
2006-2008    2 Million
2009   3.5 Million
INCREASE OF 2.5 MILLION

2010 No Estate Tax But Modified Carryover basis (Changed by new law)
2011 Scheduled to return to 1 Million (Changed by new law)

e. The Tax Payer Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRA) passed on December 17, 2010.

2010    5 Million Flat tax Rate of 35% w/ Step-up of basis OR no Estate tax with modified basis rules
2011    5 Million Reunited Estate and Gift Tax
2012    5.12 Million

f. The American Tax Payer Relief Act (ATRA) was enacted in 2013.
2013    5.25 Million
2014    5.34 Million
2015    5.43 Million
2017    5.49 Million