An estate tax is a tax on the right of the deceased to transfer property to his heirs or beneficiaries. Often called a death tax, estate tax is levied on the nonexempt portion of an estate before any portion of the estate is distributed. In the U.S., the federal estate tax is based on the total value of all property and other assets owned by the deceased at death. The estate tax must be paid by the executor, administrator or personal representative of the estate within nine months of the deceased's date of death. Federal estate tax returns are filed on IRS Form 706. For a list of tax filings due when someone dies, go to
tax returns due.
Property left to a surviving spouse who is a U.S. citizen or transferred to a trust for the benefit of the surviving spouse, is typically exempt from federal estate tax based on the marital deduction. As your estate planning attorney whether you can minimize estate and gift taxes on your estate by leaving your entire estate to your spouse.Estate tax may also be levied at the state level, depending on the laws of the state where the decedent was domiciled at the time of death. For more information on state taxes, see
Estate Tax Closing Letter
If you are the executor, personal representative or administrator of an estate, consult a tax professional about any federal or state estate taxes that may be owed by the estate. A CPA or accountant can advise whether the estate needs to file an estate tax return. After an estate tax return is filed, you may also need to obtain an
Estate Tax Closing Letter before you can close the estate.
2018 - 2019 Estate Tax Guides
For detailed guidance on tax issues affecting individuals, trusts, estates, charitable organizations, partnerships, and corporations, refer to one of the tax guides posted on our Estate Tax Books page. An estate tax manual is a good resource to find current tax rates, checklists, and special tax tables.
How to Reduce Estate Taxes
There are several ways to reduce your potential estate tax liability to ensure your children, heirs or other beneficiaries receive more of your estate. If you are concerned about losing a portion of your estate to the government through taxes, consult a tax accountant or an estate planning attorney about gifting, charitable donations, tax saving trusts, and other planning strategies to reduce estate taxes. See gifting, charitable giving, and conservation easements.
For 2019, the federal estate tax exclusion amount is $11,400,000 per person. Based on portability provisions, a spouse may be able to use the unused exemption amount of the first deceased spouse as well as his or her own exemption, so in 2019 the federal estate tax exclusion amount for a married couple is $22,800,000, according to the IRS website.For 2018, the federal estate tax exclusion amount is $11,180,000 per person. Based on portability provisions, a spouse may be able to use the unused exemption amount of the first deceased spouse as well as his or her own exemption, so in 2018 the federal estate tax exclusion amount for a married couple is $22,360,000, according to the IRS website.For 2017, the federal estate tax exclusion amount is $5,490,000 per person. Based on portability provisions, a spouse is able to use the unused exemption amount of the first deceased spouse as well as his or her own exemption, so in 2017 the federal estate tax exclusion amount for a married couple is $10,980,000. See Internal Revenue Procedure 2016-55.Estates that exceed the exclusion amount are subject to a top federal tax rate of 40 percent, but that rate is subject to change.For 2016, the federal estate tax exclusion amount is $5,450,000 per person. For 2015, the federal estate tax exclusion amount is $5,430,000 per person. For 2014, the federal estate tax exclusion amount is $5,340,000 per person.Any gifts you give that exceed the annual gift tax exemption amount will reduce your total lifetime gift exemption amount. See 2019 Gifting Limits and 2018 Gifting Limits.If your estate could possibly exceed the estate tax exemption amount, consider how your heirs or beneficiaries will feel about losing nearly half of the amount they would otherwise inherit to the federal government. If you do not have an effective tax planning strategy in place to avoid exceeding the exemption amount, the federal government could lay claim to 40 percent of assets that should otherwise pass to your designated heirs and beneficiaries.In addition, you should evaluate the state estate taxes and inheritance taxes that may be applicable to your estate. Depending on applicable state laws, the impact of taxes on your estate and your heirs could be significant. Many people confuse estate taxes with inheritance taxes. The states are struggling for revenue, just like the federal government, so changes to state inheritance taxes could occur at any time. To learn more, see inheritances.
Estate Taxes and Business Owners
If you are the owner of a small business, it is especially important to be aware of your potential federal and state estate tax liability. Some small businesses will exceed the estate tax exemption, resulting in a large tax bill after the death of an owner. Without an effective estate tax plan and business succession plan, business assets or the entire business may have to be sold to pay tax bills. With the help of a tax professional and a lawyer, you can use estate planning methods such as trusts, partnerships, and life insurance to ensure your business can continue after you are gone.
Estate Tax Resources
This page lists the estate tax rates and estate tax exemption amounts for 2019, 2018, 2017, 2016, 2015, and 2014. However, the tax rates and the amount of taxes you may owe are unique to your specific circumstances and can only be determined by a CPA or other tax professional. Any amount that may pass to a surviving spouse should be analyzed when reviewing your estate tax liability. Do not attempt to calculate the potential tax liability of your estate or of any person or entity without a licensed professional. To determine whether you need to engage in estate tax planning, consult an estate planning attorney or a CPA.
For a broader overview of the U.S. estate tax and a list of legal resources, see Estate Tax Information.
Updated on April 11, 2019.
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