Current Federal Estate Tax Thresholds
The law that President Bush signed on June 7, 2001 made significant changes in the maximum estate that a person can pass to her or his heirs without having to pay Federal Estate Tax beginning in year 2002.  This maximum amount will depend upon a number of factors. Two of the most significant factors will continue to be (1) the amount of taxable gifts the person made during her or his lifetime and (2) the year in which she or he dies. If a person made no taxable gifts during her or his lifetime, then the maximum tax-free estate (Federal Estate Taxes) would be the amount indicated in the Table below for a person who dies during the indicated year.  The 2001 law also changed the maximum rate of Federal Estate Tax.  The maximum rate (also called the marginal rate)  for each year is also indicated in the Table.  Despite the belief of many experts that the uncertainties created by this new law would cause Congress to promptly change it again, the thresholds and rates set forth in the 2001 law remain effective today (November 2006).  More recent changes to the Internal Revenue Code changed Federal Income Tax rates but left these Federal Estate Tax rates in place, at least for now.       [See Note Below]
 

 
 

Year

Maximum Tax-Free Estate

Maximum
Tax Rate
     

2001

$  675,000

55%

2002

$1,000,000

50%

2003

$1,000,000

49%

2004

$1,500,000

48%

2005

$1,500,000

47%

2006

$2,000,000

46%

2007

$2,000,000

45%

2008

$2,000,000

45%

2009

$3,500,000

45%

2010

No Limit

No Tax

2011

$1,000,000

55%
     


If an estate is larger than the threshold amount indicated above, then the estate will be subject to Federal Estate Tax. Under certain circumstances, a smaller estate may also be subject to that tax. The Tax Rates range from 37% to 55%, depending on the year of death and the size of the estate.  For persons who die in year 2006 with an estate over the current threshold ($2,000,000), the Tax Rate is between 45% and 46%.
 


Note - Warning: This Table and its contents are for informational purposes only and do not constitute legal advice. The particular circumstances may affect a person's tax obligations. You should consult an attorney in the state where you reside to determine if the Federal Estate Tax applies and whether the normal tax thresholds apply to your particular situation before acting on any information contained in this Table.


Notice Pursuant to Final Regulations Under Circular 230, effective June 20, 2005
The opinions contained in any communication on the web site are not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code. 


See other articles at this web site about estate and inheritance taxes and estate planning.

Updated November 2006

© 2001-2002 - 2003 - 2004 - 2005 - 2006  Marc H. Jaffe

Fromhold Jaffe & Adams
Attorneys at Law
Villanova Center - Suite 220
789 East Lancaster Avenue
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www.fromholdjaffe.com

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