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They want to kill death taxes.  Is that a good thing or not?

President Donald Trump’s one page tax proposal was released on Wednesday morning. Within this proposal, the Trump administration is pushing for a repeal of something they refer to as the death tax.

What’s the reason for this push, and what does it really mean for you?

Let’s get to it!

Trump Administration’s Position

According to the White House’s webpage, “The threat of being hit by the death tax leads small business owners and farmers in this country to waste countless hours and resources on complicated estate planning to make sure their children aren’t hit with a huge tax when they die. Nobody wants their children to have to sell the family business to pay an unfair tax.” (Emphasis added.)

What does “Death Tax” Really Mean?

What is the death tax? SURPRISE! There is no such thing as an actual death tax.

The term is just a clever marketing gimmick for politicians (and critics of the estate tax) to make you despise what is primarily, at the federal level, only an estate tax. ( )

Simply put, this is a tax that affects only 0.02% of all estates, or better yet—1 in 500 estates.

So why not just say “estate tax”? Because taxing an estate doesn’t get people too riled up. But the specter of Uncle Sam taxing your death—that must surely bother you.

Estate Tax

Based on 2017 exemption amounts, the federal estate tax is levied only against a tiny minority of the wealthiest of Americans. If you are single and have assets valued at less than $5,490,000 at the time of your death (in 2017), then you don’t need to worry about the federal estate tax. If you are married and have combined assets valued at less than $10,980,000, then you don’t need to worry about the federal estate tax. (There are 15 states which have a state level estate tax, but those too have exemption amounts which effectively keep the tax from touching most estates.)

Inheritance Tax

It’s worth mentioning that there is something called an inheritance tax. The inheritance tax is not a federal tax. It is a state tax levied in only 6 of our 50 states (and barely so!).

Some people like to include the inheritance tax in their discussion of death taxes as a way to make their case that Uncle Sam is out to get your wallet. Resist the bait. Uncle Sam has nothing to do with the inheritance tax. If we are discussing federal tax policy, any mention of a tax which only exists at the state level (in 6 states!), is just a distraction.

So when the President is referring to death taxes, he can only be referring to the federal estate tax—and nothing more. For this is all that his federal government can legislate upon.

(But just to be clear anyway, if you don’t live in Nebraska, Kentucky, Iowa, Pennsylvania, New Jersey, or Maryland, you don’t need to worry about it. And in most of those states, the tax doesn’t touch an inheriting spouse. And in some, even kids and grandkids are exempt from the tax! Let’s not forget that each state has its own exemption level which basically means that the tax only affects relatively few people in those 6 states.)

Effect of Repeal

Consider that the Joint Committee on Taxation has estimated that a repeal of the estate tax would cost the federal government $269 billion over 10 years. ( )
In all likelihood, that’s $269 billion that will have to come from somewhere else to satisfy the federal budget’s needs.

Does a repeal help at all?

Surely those children the White House seems to be so concerned with, and those small business owners and farmers— surely all must be paying astronomical taxes on those estates above the federal exemption amount, right?


Estate taxes only tax the amount over the exemption limit. This means, the first $5.5 million (or $11 million for married couple estates) is not taxed at all. Only that amount above the exemption level gets hit with a tax. And the rates vary. Considering that the highest tax rate is 40%, which applies only against estates that exceed the previously mentioned exemption levels by more than $1,000,000, let’s suppose our imaginary unmarried farmer’s estate is valued at $6,490,000 at the time of his death in 2017, his estate would only have to pay a $400,000 estate tax, which is an effective 6.1% tax rate on the estate.

Not really bankrupting anybody now, is it?

Qui Bono?  (Who Benefits?)

So who gains the most from repeal of the so-called death tax?

Simply put– only the ultra-wealthy. Not your average small business owner. Not your average farmer. Not– the children— unless perhaps the child’s name happens to be Ivanka Trump.

#estatetax #deathtax #DonaldTrump #Trump #IvankaTrump


To learn about corporations and LLC’s, check out:  Should I form a corporation or LLC?

Read more recent articles from Koza Law Group: Trump v. Sanctuary Cities

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