Federal Estate Tax is owed on a person’s gross estate over and above the exempted amount. I remember back in the day, in the early 2000s, when that limit was only $675.000. Over the years it has gone up, and then in 2010 or so, it jumped up quite a bit and then again in 2018. In 2022, it stands at $12.06 per person or $24.12 for a married couple.
Today, the IRS announced the new threshold for 2023. It’s a whopping $12.92M or $25.84 per couple (with portability functions), so that means if your gross estate is worth less than these amounts (individually $12.92M or as a married couple $25.84M), then you shouldn’t owe Federal Estate Taxes.
These very high exemption amounts are due to sunset in 2026, so absent an act of Congress, the exemption amount will drop way back down, likely in the $5M range. No one knows for certain what that exact number will be, but this means that any estate planning you do in 2023 may need to be reviewed and adjusted in 2026. $5M may seem like a lot of money to some people, but with real estate appreciating at historically high levels, it could be very easy to exceed this threshold. Make sure you speak with an attorney about your estate planning and update that plan regularly.
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