As Congress continues to ponder whether the federal estate tax makes any sense, the Citizens for Tax Justice weighs in with some IRS statistics.
Consider this: In 2004, there were 2,429,024 Americans who died. Only 18,431 of those Americans were required to pay federal estate tax in 2005. If you’re keeping score, that’s .8% – yep, less than 1%. That represents a dip of more than 30% over the prior year, not surprising since the federal estate tax exemption continues to rise.
A little more surprising is the number of taxable estates over $20 million – almost 500 – which comprised more than 1/3 of all federal estate taxes paid (the average net estate in that category was more than $65 million). And while the top rates for federal estate taxes (a progressive tax, not a flat tax) can reach almost 50%, the average federal estate tax rate for those who actually paid tax was just over 12%.
What does this all mean? Well, practitioners like to think it means that there is some stellar estate planning going on (ahem). It’s more likely that the federal estate tax just doesn’t affect Americans in huge numbers.
I think the estate tax is pretty much absurd. Why do we need yet another special tax rule? Just treat inherited money as income. If we really need to tax inherited money more than 35%, we can create an ultra-high tax bracket.
i need to know about estate tax’s my father died last year 2008. in his will he gave my older sister an her husband use of his home till they die.we share 1/8 of the estate. but my sister gets to live there till she die’s .do we have to pay any tax’s on the estate.or does the person who is living in the home pay these tax’s since she lives there for free. we have know say in the home or land. she can use it like she wants. till her death then an only then do we come back into the estate as those who in inherite it. please help me with this ? thank you
For federal purposes, the threshold is quite high: $2 million. If the estate doesn’t have assets in excess of that amount, there is generally no tax due.
For state purposes, the amount and “who pays” varies by statute. In many cases, the estate – not the beneficiary – of estate assets pays the tax. However, if there is a tax clause in the decedent’s will, that will determine who pays. If I were you, I’d check with an attorney in your state who is versed in these kind of matters. He or she can take a peek at the will and give you a better answer.