The federal government taxes US citizens on property, real estate, stock, or other assets that will be transferred upon an individual’s death. The federal government announced an exemption for the estate tax for the first time in 2011. Taxpayers interested in the Estate tax exemption for the tax year 2024 can check the full details here.
Federal Estate Tax Exemption 2024
The estate tax depends on the value of the estate. The federal government understands that lower-value estate properties for taxes do not work in favor of the heirs as it does not benefit individuals with inflation.
In 2011, the government introduced the Estate and Lifetime Gifts combined exemption of $5 million, to ensure people with a poverty value below the exemption amount would not be subjected to the Estate Tax.
Over the years, the government has gradually increased the exemption amount every year, however, Trump increased the exemption to $11.18 for the 2018 tax year.
The Federal Estate exemption is increased following the 2018 hike, such as $11.4 million for 2019, $11.7 million for 2021, $12.06 million for 2022, and $12.92 million for 2023.
Taxpayers who are wondering about the 2024 Estate tax exemption should know that the exemption has been hiked from $13.61 million for individuals.
So, if you are a married couple and inherit a property above $27.22 million in value, you will have to pay Estate Tax for the 2024 tax year.
Federal Estate Tax Rate 2024
With high tax exemption for the estate tax, it’s obvious that many heirs may not come under the estate tax bracket as only a small percentage of properties will be subjected to tax. However, the taxpayers must be wondering at what rate they have to pay taxes if the transferred property is worth more than the exemption would be tax.
The US citizens must understand the estate value of the exemption limit would be taxed at a high rate based on the value exceeding the exemption, for instance, the value of an estate exceeding the exemption of more than $1 million would be taxed at 40%. The taxpayers can check the below tax rate and amount for the Estate tax rate 2024:
| Taxable Amount (Estate exceeding the $13.61 Million) | Tax rate |
| $0 to $10000 | 18% |
| $10,001 to $20,000 | 20% |
| $20,001 to $40,000 | 22% |
| $40,001 to $60,000 | 24% |
| $60,001 to $80,000 | 26% |
| $80,001 to $100,000 | 28% |
| $100,001 to $150,000 | 30% |
| $150,0001 to $25,000 | 32% |
| $250,001 to $500,000 | 34% |
| $500,001 to $750,000 | 37% |
| $750,001 to $1 million | 39% |
| Above $1 million | 40% |
State Estate Taxes Exemptions 2024
Many US states have their own estate taxes depending on the state’s geopolitical significance, geography, and population. Hence, it is important to know your State Estate taxes as well, you might get exempted from the federal Estate tax, but it’s not necessary you won’t pay any tax bill on the property you inherited.
Some US states even have an inheritance tax that lets the heirs inherit property from the deceased to pay tax on lower value estate. For 2024, the following US States have announced their Estate Tax exemption:
- Connecticut matches the federal exemption limit of $13.61 million
- Maine: $6.41 million
- District of Columbia: $4.71 million
- Hawaii: $5.49 million
- Illinois: $4 million
- Massachusetts: $2 million
- Maryland: $5 million
- Minnesota: $3 million
- Oregon: $1million
- New York: $6.94 million
- Rhode Island: $1,774,583
- Washington State: $2,193,000
- Vermont: $5 million
When to file the federal Estate tax return?
The beneficiaries inheriting any estate from the deceased will be subject to tax if the estate value is above the exemption limit. The estate representative has to comply with the estate tax return within nine months of the death date.
The taxpayers can apply for an extension of six months making the total time frame fifteen months, however, the taxpayers can only avail of the extension to elect the DSUE (DEceased Spousal Unused Exclusion) depending on whether the property fills the requirement based on the filing threshold.
The taxpayers who wish to elect portability need to make sure their gross estate and adjusted taxable gifts cross the filing threshold, whereas the taxpayers can obtain an extension of time to elect for portability when their gross estate and adjustable gift tax is less than the filing threshold.
Estate tax Exemption Sunsetting Provision
The Estate tax exemptions have increased over the years, however, taxpayers should know that the increasing estate tax exemption will sunset by the end of 2025 which could lower the exemption after 2025. The high estate owners or wealthy estate individuals would be affected the most with it as the increase in the Estate tax exemption was temporary and it will lower in 2026 based on the inflation.
The US inflation is expected to lower in the coming year which would result in a 2026 estate tax exemption to drop back to the previous value of $5 million. However, taxpayers can utilize the lifetime gift exemption to reduce their tax bill in the future.
Many taxpayers use the gift tax exemption to reduce their bills and effectively plan their estate transfer to an heir or spouse. For the 2024 tax year, the yearly gift tax exemption has increased to $18,000 in 2024 from the $17,000 2023 limit.
The US citizens who inherited an estate worth $13.61 or above would be entitled to pay the Estate tax based on the tax rate of value exceeding the exemption limit. The taxpayers can file the estate tax through Form 706 on the Electronic Federal Tax Payment system or to the IRS office.