Wealthy Americans paid big money for estate taxes during the pandemic.
Key Details
- The pandemic saw a big jump in estate taxes, which is a tax on the right to transfer land, money, and other assets after death.
- Around 2,600 estates paid $18.4 billion in taxes for 2021—almost double the $9.3 billion collected in 2020, according to data from the Internal Revenue Service.
- The big jump came during the pandemic as death rates hit a multi-decade high.
Why it’s news
Wealthy Americans paid 97% more in estate tax during the pandemic, although many people think the high prices were just a one year thing due to a high death rate.
The tax includes cash, real estate, stock, or other assets that are being given to people after someone passes. But only the wealthiest estates have to pay the tax because it is based on the value of the estate and is exempt until it reaches in the millions.
During the pandemic the death rate spiked the highest it had been in a century at around 19% and more Americans were finding themselves inheriting estates.
The 40% levy kicks in for estates worth more than $12 million—or twice that for married couples. About 0.08% of the almost 3.4 million people who died in 2020 were subjected to the tax, according to Bloomberg writers Laura Davison and Ben Steverman.
You can wait up to 15 months to file an estate tax after the passing of the individual, so technically last year’s numbers could include people who died anywhere from 2021 to late 2019.
President Donald Trump signed the Tax Cuts and Jobs Act in 2017. The law gave a big cut to estate taxes and people weren’t having to pay as much out—but after that was gone tax keepers were expecting a big jump, but the actual numbers doubled predictions.
The estate tax exemption for 2022 is $12.06 million for an individual or $24.12 million for a married couple. That’s up from a $5.5 million individual threshold prior to the law change, states Bloomberg.
There has been talk of expanding the estate tax to help with wealth inequality, but many are against it as it could hurt family-owned farms and businesses.
And opponents of estate taxes argue that it taxes money that has already been taxed via an income tax.
