Federal Estate and Gift Taxes

The Congressional Budget Office (CBO) has a report on Federal Estate and Gift Taxes. One of the interesting things is only 0.7% or 17,400 of estates are actually affected by the estate tax.

In 2000, before EGTRRA was enacted, 51,200 estates were taxable, representing 2.2 percent of adult deaths in that year. EGTRRA reduced the percentage of estates that were taxable. For example, 17,400 taxable estate tax returns were filed in 2007; most were for deaths in 2006, when the effective exemption amount was $2 million, representing about 0.7 percent of adult deaths in that year.

Another concern is how the estate tax affects family farms and small businesses. The report says about 1,100 farms are affected. In 2000, when the exemption was only $675,000 vs the $4 million today, only 138 of farmer’s estates didn’t have enough liquid assets (cash) to pay the estate tax. Liquid assets include trusts which could be used to pay the taxes. Additionally, there are many provisions such as 15 year, low interest rates loans to help minimize the burden.