Even though estate taxes don’t affect many people, they have been a hot topic in the political realm after the Tax Cuts and Jobs Act doubled the lifetime exemption.
The estate tax exemption has seen some extremely significant changes since it was enacted in 1916. At this point in time an exemption of $50,000 was allowed ($0 exemption for nonresidents owning property in the U.S.) and the tax rates were graduated between 1% and 10%. As the next few decades went on, the exemption amounts and minimum graduated rates stayed fairly similar, but the top rate an estate could pay shot up to 77% at its height.
In 1977, the exemption amount shot up to $120,000, and continues to increase, but the minimum tax rate rose from 3% to 18%. The late 20th Century also saw important modifications such as unifying estate and gift taxes and allowing the unlimited marital deduction.
The estate tax was repealed for decedents who died in 2010, but that did not last long, as the tax was reintroduced in 2011 with a top rate of 35%. Since 2013, the top estate tax rate has stayed constant at 40%.
If history is any indication, we can’t expect anything to be set in stone. This is why estate planning is such an important consideration. For your tax planning needs, contact your Henry+Horne accountant today!