what are death taxes 
death taxes are taxes imposed by the federal and some state governments on someone s estate upon their death these taxes are levied on the beneficiary who receives the property in the deceased s will or the estate that pays the tax before transferring the inherited property death taxes are also called death duties estate taxes or inheritance taxes understanding death taxesa death tax can be any tax imposed on property transfer after someone s death the term death tax gained popularity in the 1990s and was used to describe estate and inheritance taxes by those who wanted the taxes repealed in estate taxes the deceased s estate pays the tax before the assets are transferred to a beneficiary with the inheritance tax the person who inherits the assets pays the estate tax charged by the federal government and some state governments is based on the value of property and assets at the time of the owner s death the federal estate tax ranges from 18 to 40 of the inheritance amount 1twelve states impose a state estate tax separate from the federal government these states are connecticut hawaii illinois maine maryland massachusetts minnesota new york oregon rhode island vermont washington and the district of columbia the federal government does not impose an inheritance tax but several states do iowa kentucky maryland nebraska new jersey and pennsylvania however in all of these states property passing to a surviving spouse is exempt from inheritance taxes nebraska and pennsylvania impose taxes on property passing to a child or grandchild in some instances death tax thresholdsmost people end up not paying the death tax because it applies to only a few people this is because the 2017 tax cuts and jobs act applied the estate tax to the basic exclusion amount which in 2023 is 12 92 million and in 2024 is 13 61 million 23the tax cuts and jobs act expires after 2025 the basic exclusion amount is set to drop back down to pre tcja levels if congress doesn t renew the act 3for example assume an individual leaves an estate valued at 13 million accounted for inflation in non exempt assets to the children and has never left any gifts that exceeded the exclusion amount the amount above the federal level in 2023 13 million 12 92 million 80 000 will be subject to estate tax according to the unified rate schedule the taxable amount is subject to a 28 tax plus a base tax of 18 200 therefore the estate will have a death tax liability of 28 x 80 000 18 200 40 600 1so if a decedent s estate is valued at less than the applicable exemption amount for the year of death the estate won t owe any federal estate taxes the unified tax credit has a set amount that an individual can gift during their lifetime before any death taxes or gift taxes apply the tax credit unifies both the gift and estate taxes into one tax system decreasing the tax bill of the individual or estate dollar to dollar 4since some people prefer to use the unified tax credits to save on estate taxes after their deaths the unified tax credit may not be used for reducing gift taxes while still alive it may instead be used on the inheritance amount bequeathed to beneficiaries after death another provision available to reduce death tax is the unlimited marital deduction which allows an individual to transfer an unrestricted amount of assets to their spouse at any time including at the death of the transferor free from tax 5the provision eliminates both the federal estate and gift tax on property transfers between spouses in effect treating them as one economic unit the transfer to surviving spouses is made possible through an unlimited deduction from estate and gift tax that postpones the transfer taxes on the property inherited from each other until the second spouse s death 6the unlimited marital deduction allows married couples to delay the payment of estate taxes upon the death of the first spouse because after the surviving spouse dies all assets in the estate over the applicable exclusion amount will be included in the survivor s taxable estate unless the assets are used up or gifted during the surviving spouse s lifetime 6advantages and disadvantages of death taxeshigh thresholdhigh tax revenuedouble taxesloopholes