Lawmakers Lessen Estate Tax Burden
One of the biggest factors to consider when you are planning your estate is the estate tax, and there is some huge news to report about changes to the law that were passed just before the new year.
To understand the impact of this new legislation you have to digest the back story. The estate tax was repealed for the 2010 calendar year as a result of a provision that was part of the Economic Growth and Tax Relief Reconciliation Act of 2001. In 2009, when the estate tax was last in effect, the estate tax exclusion stood at $3.5 million. What this means is that only the portion of an estate’s value that exceeded this amount was subject to the tax. In 2009 the rate of taxation was 45%.
A lot of people were up in arms as 2011 approached because the estate tax was to reappear, and the exclusion and top rate were set to change significantly to the disadvantage of the American taxpayer. The exclusion for 2011 was going to be just $1 million, and that was going to make many more estates subject to the tax. The rate was also going to rise to what can be accurately described as a draconian 55%.
Thankfully, before these changes could take effect there has been some eleventh hour legislation that has eased the tax burden of the American citizenry, and it is providing some significant estate tax relief. Rather than the $1 million exclusion and the 55% tax rate, the estate tax exclusion for 2011 is now going to be $10 million, and the rate has been lowered to 35%. Though a complete and permanent repeal of the estate tax would have been preferable to many, this certainly counts as a huge victory for those who oppose this excessive “death tax” that targets the few and is levied on funds that have already been taxed.
