What’s the story with the federal estate tax?
Back in 2001 with the passage of the Economic Growth and Tax Relief Reconciliation Act (EGGTRA), the threshold for the federal estate tax was gradually raised to $3.5 million dollars by 2009 and then eliminated for 2010. The 2009 levy claimed 45% of the estate over the $3.5M threshold.
This year, being 2010, there is no federal estate tax, regardless of the size of your estate. But what happens in 2011?
In 2011, the estate tax returns, the threshold reduces to $1M and estates can be taxed at a rate of up to 60% of the amount over the threshold. How did we get such a strange situation? The one word answer is “Congress”.
So what is Congress doing about the federal estate tax? If we were to judge by results, the one-word answer is “nothing”.
Last year the House of Representatives passed an extension of the estate tax at 2009 levels, but the Senate did nothing. That resulted in the current situation of no estate tax.
If the value of your estate is less than $1M, you can stop reading this article and read another one of today’s fine FedSmith articles.
What is likely to happen? Many experts expect Congress to enact a retroactive estate tax, with a threshold at or above the 2009 level, before the end of the year. In the past, the U. S. Supreme Court has allowed retroactive tax changes.
Stay tuned for further developments.