The estate tax is imposed on the value of property at death that exceeds the estate tax exemption amount. Currently, the exemption amount is $5 million per person and $10 million per couple. The estate generally includes all property in which the owner has an interest at the time of death including real estate, life insurances, annuities, and business assets.
The Economic Growth & Taxpayer Relief Recovery Act of 2001 (" 2001 EGTRRA") reduced the impact of the estate tax on most estates by raising the exemption amount while simultaneously reducing the tax rate over a period of time, eventually repealing the estate tax for one year in 2010. Without Congressional action in 2011, the exemption amount would have decreased to $1 million/spouse ($2 million/couple) and transfers in excess of this amount would have been subject to a rate of 55%.
Congress passed temporary estate tax relief in the "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Temporary Relief Act)," in December 2010. Pursuant to the Temporary Relief Act, Congress temporarily set the exemption amount at $5 million/spouse ($10 million/couple) and the top estate tax rate at 35%.
The temporary estate tax relief was scheduled to expire on December 31, 2012, after which the exemption amount would be reduced to $1 million/spouse ($2 million/couple), with a maximum estate tax rate of 55%.
Congress passed partial, permanent estate tax relief as part of the "American Taxpayer Relief Act of 2012 (the Act)" which President Obama signed into law on January 1, 2013. The Act permanently sets the exemption amount at $5 million/spouse ($10 million per couple) and indexes the exemption amount for inflation. The Act permanently increases the top estate tax rate from 35% to 40%.
The U.S. Chamber of Commerce supports full repeal of the estate tax because it:
- Takes away jobs and stifles economic activity.
- Crushes the incentive to invest and save.
- Burdens small and family-owned businesses and creates succession planning nightmares.
- Penalizes hard work and punishes entrepreneurship.
- Hurts those who have their savings tied up in land and other hard-to-sell assets.