Jul
16

It’s Sad He Died, But At Least It Was In 2010

July 16, 2010

They say that nothing is certain in life but death and taxes.

What is still up in the air, however, is what Congress is going to do the the estate tax.

According to the IRS, the U.S. estate tax is a tax on your right to transfer property at your death.

If I understand this correctly, if someone died last year, the person who inherited that person’s estate would have incurred a 45 percent tax bill.

The estate tax, and the generation-skipping transfer tax on assets given to grandchildren, were repealed at the end of last year, so if someone dies this year, their heir would receive a tax-free estate.

Both taxes are set to come back in 2011, and the estate tax will jump to 55 percent, but not if two Senators can help it.

Senator Blanche Lincoln (D., Ark.) and Jon Kyl (R., Ariz.) this week introduced a proposal that would permanently set the estate tax rate at 35 percent and increase the exemption amount to $5 million.

In 2009, up to $3.5 million of your inheritance was exempt from taxes. In 2011, that amount will fall to $1 million, so anything over that amount would be taxed at 55 percent. That could affect eight times as many taxpayers.

“In just six short months, American taxpayers will face the largest tax hike in history unless Congress acts,” said Kyl. “It is estimated that more than a half million American families will pay the estate tax over the next decade, and the lack of congressional action creates a tremendous amount of uncertainty for these families, small-business owners, and farmers.

“This uncertainty is one of several factors acting to prevent a strong economic recovery from taking hold.”

The matter should be addressed in the Senate by August.

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