Congress Considers Estate Tax Proposals
The federal estate tax is subject of constant debate in Washington, D.C. The Tax Cuts and Jobs Act, passed in December 2017, doubled the limits of the estate tax, and there have been Republican proposals to eliminate the tax completely.
Meanwhile, on the opposite end of the spectrum, Senator Bernie Sanders (I-VT) has proposed significantly lowering the estate tax exemption to $3.5 million per person — even lower than what it had been before the rules changed under the recent legislation. Polls indicate that about 50 percent of Americans support Sanders plan, while 33 percent favor eliminating the tax.
What is the estate tax?
The estate tax serves as a unified gift and estate tax, with separate exclusions for items such as bequests or gifts to charities. There are annual exclusions of gifts at $15,000 per person, per year.
Current exemption limits for the estate tax are $11.2 million per person or $22.4 million per couple, and any unused amount of that exemption by a single person can be used by the second spouse upon his or her death.
In 2018, only 1,900 people passed away who would pay estate taxes. About 40 percent of the taxable estates come from the top tenth of 1 percent of American households in terms of earnings. If Congress lowered the estate tax exemptions to Sanders’ proposed $3.5 million per individual, it would only affect about 14,000 people in a given year. The vast majority of these people would fall in the top 10 percent of U.S. households by income.
In addition, as of 2017, only 80 small businesses and farms paid any federal estate tax under the previous exemption rules. Under the current rules, almost no businesses or farms will pay the tax.
If you have questions about estate taxes and how they could affect your planning, meet with an experienced Florida estate planning attorney at BaumannKangas Estate Law.