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How the Estate Tax Works

        Money | Taxes

Author's Note

Like many of the tax topics I've covered for HowStuffWorks, this one is saddled with political controversy. It's difficult to find unbiased sources of information that explain the costs and benefits of the estate tax without devolving into political sermonizing. Thankfully the Internal Revenue Service (IRS) and some independent tax policy analysts did the heavy lifting for me. The estate tax is famously called the "death tax," and for good reason. It's not exactly a tax for dying, but it could be called a tax for dying rich. The latest tax law bumps the exclusion threshold for the tax up to $5 million for individuals and $10 million for married couples. While the "death tax" was a reasonable threat to the middle class back in the 1990s, it's now the exclusive headache of the wealthy. I was surprised and not a little heartened to learn that only 3,300 estates are expected to owe estate tax for tax year 2011.

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  • Brunet, Gillian. Center on Budget and Policy Priorities. "New Estate Tax Rules Should Expire After 2012." May 26, 2011 (March 3, 2012.)
  • Center on Budget and Policy Priorities. "The Estate Tax: Myths and Realities." February 23, 2009 (March 3, 2012.)
  • Internal Revenue Service. Statistics of Income. "Estate Tax Statistics." 2011 (March 5, 2012.)
  • Jacobson, Darien B.; Raub, Brian G.; and Johnson, Barry W. Internal Revenue Service. "The Estate Tax: Ninety Years and Counting." 2007 (March 6, 2012.)
  • McClelland, Robert. Congressional Budget Office. "Effects of the Federal Estate Tax on Farms and Small Businesses." July 2005 (March 6, 2012.)
  • Tax Policy Center. Tax Topics. "Estate and Gift Taxes" (March 5, 2012.)
  • Tax Policy Center. "Wealth Transfer Taxes: Who pays the estate tax?" (March 3, 2012.)