Client Login
 

(703) 992-9570  

plan@makonnenfg.com

Home NavigationMENU
  • Who We Are 
    • Our Firm
    • Meet the Team
    • Our Mission and Philosophy
    • Why MFG and LPL Financial
    • Strategic Resources
  • The Planning Process 
    • What We Do
    • The Planning Process
    • Forms & Planning Documents
  • Events
  • Resources 
    • Retirement
    • Estate
    • Investment
    • Tax
    • Money
    • Lifestyle
    • Glossary
    • Tax Resources
  • WealthVision
  • Contact
Estate Read Time: 4 min

A Brief History of Estate Taxes

Federal estate taxes have been a source of funding for the federal government almost since the U.S. was founded.

In 1797, Congress instituted a system of federal stamps that were required on all wills offered for probate when property (land, homes) was transferred from one generation to the next. The revenue from these stamps was used to build the Navy for an undeclared war with France, which had begun in 1794. When the crisis ended in 1802, the tax was repealed.1

Estate taxes returned during the build-up to the Civil War. The Revenue Act of 1862 included an inheritance tax, which applied to transfers of personal assets. In 1864, Congress amended the Revenue Act, added a tax on transfers of real estate, and increased the rates for inheritance taxes. As before, once the war ended, the Act was repealed.1

In 1898, a federal legacy tax was proposed to raise revenue for the Spanish-American War. This served as a precursor to modern estate taxes. It instituted tax rates that were graduated by the size of the estate. The end of the war came in 1902, and the legacy tax was repealed later that same year.1

In 1913, however, the 16th Amendment to the Constitution was ratified – the one that gives Congress the right to “lay and collect taxes on incomes, from whatever source derived.” This amendment paved the way for the Revenue Act of 1916, which established an estate tax that in one way or another, has been part of U.S. history since then.1

In 2010, the estate tax expired – briefly. But in December 2010, Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The new law retroactively imposed tax legislation on all estates settled in 2010.2

In 2012, the American Tax Relief Act made the estate tax a permanent part of the tax code.3

As part of the 2017 Tax Cuts and Jobs Act, estate tax rules were adjusted again. The estate tax exemption was raised to $11.2 million, a doubling of the $5.6 million that previously existed. Married couples were able to pass as much as $22.4 million to their heirs. As of 2022, that rate has risen to $12.06 million per individual (and $24.12 million for married couples). The Act is set to expire in 2025. If you’re uncertain about your estate strategy, it may be a good time to review the approach you currently have in place.4

Estate Taxes and Overall Federal Revenues

Estate taxes typically account for about one percent of total federal revenue.5

Chart Source: USASpending.gov, 2022

Exemption through the Years

Federal estate taxes exempt a share of estates from federal estate taxes. For the 2022 tax year, if an estate is worth less than $12.06 million, no federal estate taxes may apply.4

YearExclusion AmountHighest Tax Rate
2002$1,000,00050.0%
2003$1,000,00049.0%
2004$1,500,00048.0%
2005$1,500,00047.0%
2006$2,000,00046.0%
2007$2,000,00045.0%
2008$2,000,00045.0%
2009$3,500,00045.0%
2010$0 or $5,000,0000% or 35%
2011$5,000,00035.0%
2012$5,120,00035.0%
2013$5,250,00039.6%
2014$5,340,00039.6%
2015$5,430,00039.6%
2016$5,450,00039.6%
2017$5,490,00039.6%
2018$11,180,00037%
2019$11,400,00037%
2020$11,580,00040%
2021$11,700,00040%
2022$12,060,00040%

Chart Source: TheBalance, May 23, 2022

1. IRS.gov, 2022
2. Congress.gov, 2022
3. Congress.gov, 2022
4. Investopedia.com, February 23, 2022
5. USASpending.gov, 2022

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Share |
 

Related Content

Ask a Financial Professional: Help! My Business is Overexten

Ask a Financial Professional: Help! My Business is Overexten

Every business wants to grow. But there’s a risk of extending your business so far, so fast that you hit the tipping point...

Rightsizing for Retirement

Rightsizing for Retirement

What does your home really cost?

Business Boosters: Tips for Building a Team

Business Boosters: Tips for Building a Team

Here are a few tips on how to recruit, hire and onboard employees who fit your culture and share your passion to succeed.

 

Have A Question About This Topic?









Thank you! Oops!
 

Get Financial News & Updates Delivered to Your Inbox





Thank you!

Error processing your request. Please try again at a later time.

Check the background of your financial professional on FINRA's BrokerCheck.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

We take protecting your data and privacy very seriously. As of January 1, 2020 the California Consumer Privacy Act (CCPA) suggests the following link as an extra measure to safeguard your data: Do not sell my personal information.

Copyright 2023 FMG Suite.


The LPL Financial registered representative(s) associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

Securities and Advisory services offered through LPL Financial, a registered investment advisor. Member FINRA & SIPC.

Registered as IAR in the following states: TX and VA.

Contact

Makonnen Financial Group, LLC
Office: 703-992-9570
Toll-Free: 800-877-7210
Fax: 703-992-9945

5568 General Washington Drive
Suite A-200
Alexandria, VA 22312

plan@makonnenfg.com

Facebook Twitter LinkedIn

Quick Links

  • Retirement
  • Investment
  • Estate
  • Tax
  • Money
  • Lifestyle
  • All Articles
  • All Videos
  • All Calculators
  • All Presentations