The exemption from federal estate taxes has increased significantly since 1997 while the estate tax rate has significantly decreased. Below is a chart that shows the changes in the estate tax exemption and estate tax rate from 1997 through 2014.
Tax years 2010 through 2012 are based on the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act ("TRUIRJCA" for short) that was signed into law by President Obama on December 17, 2010. This law was only good for two years and supposed to sunset on December 31, 2012, meaning that on January 1, 2013, the federal estate tax exemption and rate were supposed to default to the numbers that were in effect in 2001/2002. However, on January 1, 2013, Congress passed the American Taxpayer Relief Act ("ATRA" for short) and President Obama signed it into law on January 2, 2013. ATRA makes permanent changes to the laws governing federal estate taxes, gift taxes, and generation skipping transfer taxes: Overview of 2013 Estate Tax, Gift Tax & Generation Skipping Transfer Tax Laws.
To view additional information regarding the estate tax, gift tax, and generation skipping transfer tax rules for the 2008 through 2013 tax years, click on the link for the applicable year provided in the chart below.
To view the estate tax exemptions and estate tax rates from 1916 (the first year the estate tax was enacted) through 1997, please refer to the following: Table Showing Federal Estate Tax Exemption and Rate: 1916 - 1997.
And aside from federal estate taxes, do not overlook state estate tax and inheritance tax liability since quite a few states currently collect either or both of these taxes at the state level:
*The heirs of decedents who died in 2010 will have the choice to use the $5,000,000 estate exemption/35% estate tax rate or $0 estate tax exemption/0% estate tax rate coupled with use of the modified carryover basis rules.
**TRUIRJCA provided that the estate tax exemption, lifetime gift tax exemption, and generation-skipping transfer tax exemption would be indexed for inflation in 2012, hence the $120,000 increase in the 2012 estate tax exemption. ATRA picks up where TRUIRJCA left off, hence the additional $130,000 increase in the 2013 estate tax exemption and the $90,000 increase in the 2014 estate tax exemption.
Historical and Future Federal Estate Tax Exemptions and Rates
|Year||Estate Tax Exemption||Top Estate Tax Rate|
|*2010||$5,000,000 or $0||35% or 0%|