What Is Estate Tax?

When you die, your estate, which includes the money and property you own, may be subject to the federal estate tax. Typically, the average household won't be subject to the estate tax, but those whose estate exceeds the exclusion amount may see taxes as high as 45 percent on the estate.

Filing Requirement

For 2009, you must file an estate tax return if the inherited estate exceeds $3.5 million.

Estate Tax Deductions

There are ways in which you can lower the likelihood of the estate being subject to taxes by giving gifts and taking advantage of estate tax deductions. The deductions include a marital deduction, charitable deduction, mortgages and debt, and estate administrative expenses and losses while it is distributed.

Unified Credit to Estate Tax

The unified credit is a credit against the estate and gift tax that allows you to transfer a portion of your estate tax-free. For 2009, the exclusion amount is $1,455,800

Progressive Taxation

The estate tax starts at 18 percent for the lowest portion of the estate that exceeds the exclusion amount and increases to 45 percent.


In 2010, the estate tax will be repealed, but it will return in 2011.