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Estate Tax

The estate tax has been an important source of federal revenue for nearly a century, yet a number of misconceptions continue to surround it.  This explanation describes facts about the federal estate tax.

Roughly 2 of Every 1,000 Estates Face the Estate Tax

Today, 99.8 percent of estates owe no estate tax at all, according to the Joint Committee on Taxation. Only the estates of the wealthiest 0.2 percent of Americans — roughly 2 out of every 1,000 people who die — owe any estate tax. This is because of the tax's high exemption amount, which has jumped from $650,000 per person in 2001 to $5.43 million per person in 2015.

 

Taxable Estates Generally Pay Less Than One-Sixth of Their Value in Tax

Among the few estates nationwide that owed any estate tax in 2013, the effective tax rate — that is, the share of the estate's value paid in taxes — was 16.6 percent, on average, according to the Urban-Brookings Tax Policy Center (TPC). That is far below the top statutory rate of 40 percent. Claims by repeal proponents that the estate tax consumes nearly half of an estate's value are therefore false.

 

Large Loopholes Enable Many Estates to Avoid Taxes

Many wealthy estates employ teams of lawyers and accountants to develop and exploit loopholes in the estate tax that allow them to pass on large portions of their estates tax-free. These strategies don't benefit the broader economy; they only allow the wealthiest estates to avoid taxes.

 

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