what are estate taxes

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Key TakeawaysThe estate tax is a financial levy on an estate,based on the current value of its assets.Federal estate taxes are levied on assets in excess of $11.4 million as of 2019,but about one in four states have their own estate taxes,with lower limits.Assets transferred to spouses are exempt from estate tax.More items…

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  • What is an estate tax called?

  • Estate Tax. What is an ‘Estate Tax’. An estate tax is a tax levied on an heir’s inherited portion of an estate if the value of the estate exceeds an exclusion limit set by law. The estate tax is mostly imposed on assets left to heirs, but it does not apply to the transfer of assets to a surviving spouse.

  • How much tax do you pay on an estate?

  • Above those thresholds, the tax is usually assessed on a sliding basis, much like the brackets for income tax. In 2019, the tax rate is typically 10% or so for amounts just over the threshold and rises in steps, usually to 16%. Some states, such as Massachusetts, offer tax rates as low as 0% depending on the taxable size of the estate. 11

  • Do all states have an estate tax?

  • At one point, all states had an estate tax. The federal estate tax return offered a credit toward state-level estate taxes and states based their own tax rates on this federal credit. But that changed in 2001 when federal tax law amendments eliminated the credit. Many states repealed their estate taxes as a result.

  • What is the difference between estate tax and inheritance tax?

  • The estate tax is sometimes referred to pejoratively as a death tax since it is levied on the assets of a deceased individual. An estate tax is applied to an estate before the assets are given to beneficiaries. In contrast, an inheritance tax applies to assets after they have been inherited, and are paid by the inheritor.

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