With the Trump administration proposing a new tax plan, the estate tax has been in the news the last few days. We want to take a look at what this tax is, and how it could potentially affect you.
What is the estate tax?
The estate tax is an additional tax on an estate being transferred after death. The provision in the tax code says that an estate worth more than $5.49 million is subject to the estate tax. Because it applies after someone passes away, it is sometimes referred to as the “death tax.”
Who does the tax apply to?
Given the high threshold — $5.49 million – very few people pay the tax. According to a Washington Post story, the Tax Policy Center estimates only 5,200 2017 tax returns will be subject to the estate tax. However, those returns will generate about $19.7 billion in taxes.
What would change in the proposed plan?
The proposed changes get rid of the estate tax. However, if your estate is worth less than $5.49 million, the tax never would have applied to you in the first place. If your estate is worth more than $5.49, there would be no estate tax applied after you pass away should this new plan become law.
The reality is, most people would not be affected if the estate tax is removed. If you have a large estate, this specific provision is worth keeping an eye on. Everyone else can keep on dreaming of the day they have $5.49 million.