Estate Tax, Gift Tax, GST Tax Exemptions and Rates: 1987 - Present

Table Showing Federal Transfer Tax Exemptions and Rates

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The federal estate tax has been around in some form since 1916.  Beginning in 1997 the estate tax, gift tax, and generation-skipping transfer ("GST") tax exemptions began creeping up and beginning in 2002 the estate tax, gift tax, and GST tax rates began creeping down.

Overview of Federal Transfer Tax Laws from 2001 to Present

In June 2001, the Economic Growth and Tax Relief Reconciliation Act ("EGTRRA") was signed into law.

  In addition to significant income tax cuts, EGTRRA gradually phased out the estate tax until it disappeared for one year in 2010 and was replaced by the modified carryover basis rules.  Under these rules, the income tax cost basis of inherited property could be stepped up by $1,300,000, as opposed to an unlimited step-up in basis under prior estate tax laws. In addition, if the property was inherited by a surviving spouse (either directly or through a ​qualified terminable interest property ("QTIP") trust), then the property could receive an additional $3,000,000 step up in basis.  EGTRRA also provided that it would sunset on December 31, 2010, which meant that the estate tax was supposed to return in 2011 based on the laws that were in place all the way back in 2001.

Instead of disappearing completely in 2010, the estate tax came back under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act ("TRUIRJCA").

  This statute was signed into law on December 17, 2010, and applied retroactively to the estates of decedents dying between January 1, 2010 and December 31, 2010.  TRUIRJCA gave the heirs of decedents who died between these dates the choice between using the modified carryover basis rules or applying the estate tax rules which bumped the estate tax and gift tax exemptions to $5,000,000, reduced the applicable tax rates to 35%, and did away with the GST tax completely.

  In order for the heirs of 2010 decedents to opt into the modified carryover basis rules and out of the estate tax rules, the heirs were required to file a new IRS form called Form 8939, Allocation of Increase in Basis for Property Received from a Decedent.

For 2011, TRUIRJCA provided that the estate tax, gift tax, and GST tax exemptions were $5,000,000 each and the applicable rates were 35% each.  TRUIRJCA also provided that each of the exemptions would be indexed for inflation in 2012 which increased them to $5,120,000.  The tax rate remained at 35%.

TRUIRJCA also introduced a new tax concept:  portability of the estate tax and gift tax exemptions between married couples.  Under portability, the surviving spouse of a decedent who died in 2011 or 2012 could add any unused exemption of the deceased spouse to their own exemption by timely filing a federal estate tax return, IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, and making the portability election.

TRUIRJCA was supposed to be in effect for only two years, which meant that on January 1, 2013, the federal estate tax exemption and rate were supposed to default to the laws that were in effect in 2001.

  However, on January 1, 2013, Congress passed the American Taxpayer Relief Act ("ATRA") and President Obama signed it into law on January 2, 2013. ATRA made permanent the changes to the laws governing estate taxes, gift taxes, and GST taxes under TRUIRJCA with one exception:  the applicable tax rates for each type of transfer tax was increased from 35% to 40%.

To view the estate tax exemptions and estate tax rates from 1916 (the first year the estate tax was enacted) through 1997, please refer to the following: Table Showing Federal Estate Tax Exemption and Rate: 1916 - 1997.

What is the Future of the Federal Transfer Tax Laws?

While ATRA has made the laws governing federal estate taxes, gift taxes, and GST taxes permanent, President Obama has been pushing for changes to these laws that would have a significant impact on certain estate planning techniques used to reduce estate taxes.

  For an overview of these proposed changes, refer to What is the Future of the Federal Estate Tax in 2015 and Beyond?

State Death Taxes

Aside from federal transfer taxes, a handful of U.S. states ​do collect a death tax at the state level. 

In some states, the tax is based on the overall value of the estate, which is referred to as an estate tax, while in other states the tax is based on who inherits the estate, which is referred to as an inheritance tax.  Refer to What's the Difference Between an Estate Tax and an Inheritance Tax? to learn more about these types of state-assessed death taxes.  In addition, the following charts give an overview of state-assessed death taxes:

State Estate Tax and Exemption Chart
State Inheritance Tax Chart

Guide to Transfer Tax Chart

*The heirs of decedents who died in 2010 had the choice to use the $5,000,000 estate exemption/35% estate tax rate or $0 estate tax exemption/0% estate tax rate coupled with the use of the modified carryover basis rules.

**TRUIRJCA and ATRA provide that the estate tax exemption and gift tax exemption are "portable" for married couples in 2011 and future years.

***TRUIRJCA and ATRA provide that the estate tax exemption, lifetime gift tax exemption, and GST tax exemption will be indexed for inflation in 2012 and future years.

Historical and Current Federal Transfer Tax Exemptions and Rates

YearEstate Tax ExemptionEstate Tax RateGift Tax ExemptionGift Tax RateAnnual ExclusionGST ExemptionGST Rate
*2010$0 or $5,000,0000% or 35%$1,000,00035%$13,000No GST tax0%