The Internal Revenue Service (IRS) describes the federal estate tax as a tax on Americans' rights to transfer property at the time of their deaths. The tax applies to everything a person owns or has interest in at the time of death. The tax is changing drastically in 2010 and 2011.
Estate Tax Repealed for 2010
The IRS confirms that Title V of the Economic Growth and Tax Relief Reconciliation Act of 2001 repeals the federal estate tax for Americans dying after Dec. 31, 2009, and before January 1, 2011. No federal estate tax will apply to these estates.
Estate Tax Returns in 2011
The IRS warns taxpayers that, as of July 2010, the federal estate tax is set to return effective Jan. 1, 2011. The renewed tax will apply to estates of individuals passing away after Dec. 31, 2010.
Threshold in 2011
The IRS says the exemption amount for estates in 2011 will be $1,000,000. This means that the federal estate tax will not apply to estates valued under $1,000,000. As of July 2010, the maximum rate for estate tax is 55 percent.
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Possible Changes for 2010
The IRS warns taxpayers that Congress could retroactively reinstate the estate tax for people dying in 2010. The IRS promises to act swiftly to determine the impact of any such legislation and help taxpayers determine their tax obligations.
Possible Changes for 2011
In the "Frequently Asked Questions" section of its website, the IRS answers a question asking whether Congress will change the exemption amount and rates for the estate tax in 2011. The IRS cannot answer the question but promises to assess the impact of any such legislation to help taxpayers calculate tax obligations.