NB: This article was published on December 13, 2010 and contains information that may be outdated. For current information regarding the estate tax, read: Estate Tax Certainty…For Now
If you’ve been keeping up with the estate tax debate, you’ve probably already heard that President Obama reached a tax cut agreement with Republicans last week. Part of the deal set the estate tax exemption amount at $5 million and the tax rate at 35 percent for individuals passing more than that to their heirs.
The agreement is expected to be approved by the Senate tomorrow, but then heads to the House of Representatives, where Democrats have been quick to criticize it. Their primary point of contention seems to be the estate tax provision, which Speaker Nancy Pelosi called a “bridge too far.”
As I mentioned in last week’s article, even if the estate tax exemption was reinstated at the $1 million, 98 percent of Americans would not have to pay any estate taxes at all. At a $5 million exemption, only an estimated .15 percent will be affected, or about 3,600 estates.
Late last week, Democrats suggested that they would not even bring the agreement to the House floor, but their tone seems to have softened. Now, Democrats say that the deal will come up for a vote, but that they will be trying to change the estate tax provision. Democrats favor returning to last year’s exemption amount and tax rate, which applied at 45 percent tax rate to estates valued at over $3.5 million without estate taxes. Only about 5,500 estates were affected in 2009.
Will the deal pass in the House? I’ll continue to keep you updated.