Could the Inheritance Tax Make a Comeback?
The federal estate tax exemption has increased for decades, but in the midst of a deadly pandemic, there is a possibility the exemption will be significantly reduced.
The inheritance tax dropped off significantly in the 1970s. Today, it only accounts for about .5% of tax revenue in countries where it is still used, according to a report from the Organization for Economic Co-Operation and Development.
Changes to inheritance taxes could come as a part of more widespread tax changes which have already been posed under the new administration.
Inheritance taxes are generally unpopular with voters, but there are also frequently misunderstandings about the tax and the impact it can have. The exemption in the United States is more than $11 million, which means only a fraction of a percent of Americans would ever have to worry about the inheritance tax being levied.
Proponents of inheritance taxes say it is a helpful tool for addressing and adjusting wealth inequality and supporting governments that need to find new revenue sources in tough economic times. Studies also show this tax is easier to administer than other types of taxes.
It remains unclear exactly what types of tax reforms will come in the future. Regardless, it is important for anyone planning their estate to keep an eye on the estate and inheritance tax situation, especially as there is an increased focus on kickstarting the economy as a result of the pandemic.
For more information about inheritance taxes, contact an experienced Florida estate planning lawyer at BaumannKangas Estate Law.