The Congress Republicans are on their way to fulfill their long-standing dreams of federal estate tax exemption. They can do it in such a manner which can be much more generous compared to previous repeal efforts. This is because the recent bills passed by House and Senate will totally eliminate or significantly reduce the quantum of taxes the heirs now pay on the estates worth more than $5.5 million. Conservatives have long hated the estate tax. The tax was, for a short time, eliminated by Congress in 2010. It, however, came back again and continues to be applicable at the present time.
People at present have their earnings taxed when their assets are sold off. Such assets are generally sold post appreciation of their value. The list of such assets includes real estate or stocks. Heirs, however, are exempted from such tax. This is due to them already paying the requisite estate tax. The Congress recently approved a few bills which would reduce or eliminate the estate tax. This will be done with the exemption being valid. These bills would do the needful without any requirement for repealing the provision of what is colloquially known as the “stepped up basis”.
In short, the Congress-approved bills will reduce or eliminate the estate tax, and also leave the exemption as it was. It means parents can pass on their progeny the assets which have considerably gained in value, and their offspring will not have to pay any taxes on asset appreciation.
For the rich
According to Lily Batchelder of New York University Law School, this new policy is much more liberal than its previous ones. The law professor, who also specializes in public policy, said that she has never before seen such a policy which will completely repeal estate tax and also fully exempt the individual from all taxes which can be applicable on accrued gains made on large estates. The passed bill would allow double exemption on the big estates. This will permit people to pass on the estates valued at $11 million to heirs without the payment of any taxes.
For married couples, the exemption will be $22 million. The estate tax will be gradually reduced by the House Bill. It will be totally scrapped in 2023. Leaders of the Senate and the House are trying to homogenize the two tax overhaul versions. A vote on the matter is expected soon.