The Death Tax 2015 Repeal Act has been favorably voted out of committee in the U. S. House of Representatives. While the House and the Senate might pass a version of the death tax 2015 bill, the president, some commentators suggest, may veto it. Doing away with the federal estate tax has been contentious for decades. When individuals get upset at the idea of paying a death tax, known as the federal estate tax, there continues to be many not acquainted with the death tax they so much dislike.
This post summarizes the dreaded death tax and highlights what the proposed repeal of the federal death tax might look like. Currently, there is a death tax imposed by the federal government and some individual states. The states that impose an inheritance tax on a deceased person’s estate do so in different ways. Florida imposes no state inheritance tax.
The federal estate tax is imposed when transferring an individual’s property at death. The tax is applied on the “taxable estate.” That is the market value of the property transferred, but the tax can be reduced by allowed deductions. The federal estate tax is computed by a schedule that applies to gifts made during a person’s lifetime and gifts made at death.
For persons that died or made a gift in 2014 and 2015, the death tax rate is 40% – this percentage is not a typographical error. Before you faint, please note that the first $5,430,000 of asset value for persons dying or making a gift in 2015 is not taxed.
If the Death Tax 2015 Repeal Act somehow makes it through both houses of Congress and the president signs the bill into law, this repeal of the federal estate tax would include a transition rule for assets placed in a qualified domestic trust by a decedent who died before the effective date of the proposal. The proposed repeal bill would retain the gift tax with a top gift tax rate of 35%. The lifetime gift tax exemption amount under the proposed bill would remain at $5 million adjusted for inflation for years after 2011. The 2015 gift tax annual exclusion of $14,000 would continue to apply. The proposed bill would provide that a transfer into a trust would be a taxable gift, unless the trust was owned by the donor or the donor’s spouse, known as a grantor trust.
Property received as a lifetime gift would continue to have a “carryover basis,” meaning the tax basis of the donee would be the same as the donor. The so-called “step-up” in tax basis would continue, meaning the basis of the assets from the deceased’s estate would be the market value on the date of the person’s death.
To learn more about inheritance taxes, asset protection, estate planning or probate, click this link to visit our website page: Estate Planning and Taxes