Estate and Gift Tax

Overview:  The estate and gift tax is a very small slice of the revenue pie, accounting for only 1% of Federal revenues, and impacts only a tiny percentage of Americans due to an $11.2 million exemption.

  • The federal estate tax is applied to property transferred at death  minus  exemptions and allowable deductions.
  • Most Americans Exempt:  The large exemption amount — effectively $11.2 million for 2018 — exempts nearly all Americans except the wealthiest from the estate tax.  The exemption amount is adjusted annually for inflation.
  • Property transferred to spouse exempt:  An unlimited marital deduction is allowed for property transferred to a surviving spouse.
  • 40% Tax Rate:  A 40% tax rate is applied to property transferred at death — but only to property in excess of the $11.2 million exemption amount and after applying allowable deductions.
  • Allowable deductions include estate administration expenses and charitable bequests.
  • Gift Tax:  The federal gift tax operates alongside the estate tax to prevent individuals from avoiding the estate tax by transferring property to heirs before dying. For 2018, the first $15,000 of gifts from one individual to another is excluded from taxation and does not apply to the lifetime exemption.  However, any amount over this annual exclusion lowers the effective lifetime estate tax exemption.

Nonpartisan Reports on the Estate Tax