Congress, Trump Administration Could Eliminate Estate Tax
The future of the estate tax always seems to be up for debate, but under the administration of President Donald Trump, it looks like a full repeal of the tax is possible. The president repeatedly promised throughout his campaign to eliminate the tax, and the Republican-controlled Congress may be amenable to those plans.
Currently, the estate tax rate is at 40 percent. However, the exemptions are currently set at $5.49 million for an individual and nearly $11 million for a married couple. The average effective rate is much lower, as only money over that exemption limit gets taxed. In 2013, for example, the average size of estates that paid estate taxes was $22.7 million, with an average effective rate of 16.6 percent.
In 2015, only 11,917 estates filed Form 706 (the estate tax return form), and of that number, only 4,918 ended up owing any tax at all. Thus, the proportion of people the estate tax affects is quite small.
Debate continues at the federal level
Those who are against eliminating the estate tax argue that it only affects the richest fraction of a percent of Americans. The estate tax also does have certain advantages for wealthy beneficiaries, as under current estate planning rules, there are no capital gains taxes paid on any assets up to the exemption amount.
Many people who argue for a repeal of the estate tax say they would support replacing it, at least in part, with new capital gains taxes on estates.
It remains to be seen exactly what will be done with the estate tax, as for now the issue has taken a backseat to more attention-grabbing issues like immigration and healthcare reform. But we can likely expect the estate tax to become a bigger issue in the foreseeable future.
To learn more about how you can reduce your tax obligations through sound estate planning, speak with a dedicated Tampa will and trust attorney at BaumannKangas Estate Law.