Historical Look at Estate and Gift Tax Rates

MAXIMUM ESTATE TAX RATES (1916–2022)

For Estate Taxes:

¹ Estate tax was composed of a basic estate tax plus an additional estate tax; in effect, estates never paid more than the amount of the additional estate tax.

² Beginning in 2002, the surtax on estates in excess of $10 million is repealed. In addition, the maximum estate tax rate began to decrease, while the applicable exclusion amount for estate tax purposes (i.e., the lifetime amount shielded from estate tax) began to increase. During the years 2002 through 2009, the estate tax applicable exclusion amount was $1 million in 2002 and 2003, $1.5 million in 2004 and 2005, $2 million in 2006 through 2008, and $3.5 million in 2009.

³ Although the estate tax rate schedule for 2007 through 2009 (Code Sec. 2001) shows the 45% rate being imposed on estates in excess of $1.5 million, the estate tax applicable exclusion amount effectively precludes taxation of any transfers in an amount below $2 million in 2006 through 2008 and $3.5 million in 2009.

⁴ The Tax Relief, Unemployment Reauthorization and Job Creation Act of 2010, reinstated the estate tax effective for decedents dying after December 31, 2009. However, the Tax Relief Act of 2010 also provided an election for the estates of decedents dying in 2010 to use the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) rules of no estate tax, but a carryover basis for inherited assets. Accordingly, few estates of decedents dying in 2010 will actually be subject to the estate tax. In addition, although the estate tax rate schedule for 2010 through 2012 (Code Sec. 2001) shows the 35% rate being imposed on estates in excess of $500,000, the estate tax applicable exclusion amount effectively precludes taxation of any transfers in an amount below $5 million in 2010 and 2011, and $5,120,000 in 2012.

⁵ Beginning in 2011, the Tax Relief Act of 2010 allows a surviving spouse to utilize the unused portion of the applicable exclusion amount (as otherwise increased under the Act) of his or her last predeceased spouse. An election by the predeceased spouse’s estate is required.

⁶ The Tax Relief Act of 2010 reinstated the estate tax at a lower rate and a higher exclusion amount than would have been the case if the sunset called for under EGTRRA had occurred. However, the Tax Relief Act of 2010 was only to apply to estates through 2012. It was scheduled to sunset in 2013, leaving the law as if EGTRRA and the Tax Relief Act of 2010 had never been passed. The American Taxpayer Relief Act of 2012 struck the sunset provisions of EGTRRA and the 2010 Tax Relief Act, thus making the changes enacted by those laws permanent. The 2012 American Taxpayer Relief Act also raised the maximum estate tax rate to 40%. Although the estate tax rate schedule for 2013 and beyond (Code Sec. 2001) shows the 40% rate being imposed on estates in excess of $1,000,000, the applicable exclusion amount effectively precludes taxation of any transfers in an amount below $5,490,000 in 2017 (it was $5,450,000 in 2016, $5,430,000 in 2015, $5,340,000 in 2014, and $5,250,000 in 2013).

⁷ The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) doubled the basic exclusion amount to $10,000,000, as adjusted for inflation. It also altered the methodology for computing inflation adjustment amounts in the Internal Revenue Code to use the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).

MAXIMUM GIFT TAX RATES (1924–2022)

For Gift Taxes:

¹ Beginning in 2004, the applicable exclusion amount for gift tax purposes (i.e., the lifetime amount shielded from gift tax) differed from the amount used for estate tax purposes. During the years 2002 through 2010, the gift tax applicable exclusion amount remained constant at $1 million, while the estate tax applicable exclusion amount was $1 million in 2002 and 2003, $1.5 million in 2004 and 2005, $2 million in 2006 through 2008 and $3.5 million in 2009.

² Although the gift tax rate schedule for the years 2010 through 2012 (Code Sec. 2502) shows the 35% rate being imposed on transfers in excess of $500,000, the gift tax applicable exclusion amount effectively precludes taxation of any transfers in an amount below $1 million in 2010, $5 million in 2011 and $5,120,000 in 2012.

³ Beginning in 2011, the Tax Relief Act of 2010 allows a surviving spouse to utilize the unused portion of the applicable exclusion amount (as otherwise increased under the Act) of his or her last predeceased spouse. An election by the predeceased spouse's estate is required.

⁴ The Tax Relief Act of 2010 lowered the top tax rate and increased the exclusion amount to $5 million compared to what would have been the case if the transfer tax provisions of EGTRRA had been allowed to sunset as planned. However, the Tax Relief Act of 2010 was only to apply to gift taxes through 2012. It was scheduled to sunset in 2013, leaving the law as if EGTRRA and the Tax Relief Act of 2010 had never been passed. The American Taxpayer Relief Act of 2012 struck the sunset provisions of EGTRRA and the 2010 Tax Relief Act, thus making the changes enacted by those laws permanent. The 2012 Taxpayer Relief Act also raised the maximum gift tax rate to 40%. Although the gift tax rate schedule for 2013 and beyond (Code Sec. 2502 by reference to Code Sec. 2001) shows the 40% rate being imposed on gifts in excess of $1,000,000, the applicable exclusion amount effectively precludes taxation of any transfers in an amount below $5,490,000 in 2017, (it was $5,450,000 in 2016, $5,430,000 in 2015, $5,340,000 in 2014, and $5,250,000 in 2013).

⁵ The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) doubled the basic exclusion amount to $10,000,000, as adjusted for inflation. It also altered the methodology for computing inflation adjustment amounts in the Internal Revenue Code to use the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).

Source: Wolters Kluwer CCH® AnswerConnect, 2022
Permission for use granted.