This year marks the final year of the Bush-era estate tax exemptions-that is unless Congress acts. The Bush-era tax exemptions put forth at the early start of the millennium will end on Dec 31, 2012. So what will they look like in 2013 if they are left to expire?
In both 2001 and 2003, together with Congress, the Bush administration revised the tax code and increased both the estate tax exemption amount and estate tax rates.
The laws were set to expire at the end of 2010, but were extended in early December 2010. For both the 2010 and 2011 tax years, President Obama and Congressional leaders agreed to set the estate tax exemption at $5 million and the estate tax rate at 35 percent. (This essentially means that all amounts up to $5 million transferred from a deceased person upon his or her death are tax free and any remaining amounts above and beyond that are taxed at a 35 percent tax rate.) This year’s estate tax rate remains the same, but the exemption is now $5,120,000 to adjust for inflation.
However, without Congressional intervention in 2012, the estate tax exemption will drop to $1 million in 2013 and any amounts above that mark will be taxed at 55 percent.
Both sides of the political line have proposed ideas on what to do. Some believe the tax exemption should be extended, others believe that the tax exemption should decrease or simply repealed altogether. As of now, it remains to be seen just what action, if any, Congress will take.
Source: Wall Street Journal, What Will Tax Rates Look Like in 2013? Jan 9, 2012