Estate tax calculator is an easy tool to find out the federal estate tax which imposed on the total value of estate of deceased person . Since this tax is imposed for the first time only on happening of pne’ demise, it is also referred to as a “death tax.” In United states, many states also impose their own estate taxes .
After Tax Cuts & Jobs Act , most of the low valued estate wont have to pay estate tax as the , estate tax basic tax exemptions threshold has gone up substantially. For the year 2019 ,it is $11.40 million whereas for the year 2020, it is 11.58 million.Further, there is no estate tax if the assets are the transferred from deceased person to his/her surviving spouse.
Major Points on Estate Tax
- Estate tax and tax on income of an estate are two different things. Estate taxes are computed by aggregating the total value of the deceased’s assets. If the value of these assets does not exceed the basic state/federal exemption(11.58 million for 2020), no estate taxes are owed. But an Estate also has to pay tax on income it earns during a taxable year.So, the income is aggregated and then tax is computed by applying estate income tax rates.
- Inheritance tax is also associated with the property of a deceased person. But the difference between Estate Tax and Inheritance tax is that while estate tax is paid by estate itself, inheritance tax is paid by the person who receives the asset of a deceased person
- While computing estate tax , the basic exemption gets reduced by the amount of gift made on which tax was paid. An individual can gift asset or money up to $15,000 in the year 2020 without any tax . to as many individuals as they desire without incurring a gift tax.
- If gift taxes were paid on any gifts during a person’s life, any amount over the annual gift tax exclusion will count towards the lifetime gift tax exclusion, which will then be subtracted from unified credit unless the gift tax is paid in the year it is incurred. It will then be taken as a credit against any estate tax owed. In addition, any portion of the unified credit that is unused can be used as an amount to be passed to a surviving spouse.
Who needs to file estate tax return?
I have already posted a detailed article on filing estate tax return. Please read that.