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The most frequently asked tax questions related to Estate Tax
For Tax Payers
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In 2011, For an estate or gift(s) with:
Taxable income of $1 but not over $10,000 the tax is $0 plus 18 % over $0
T.I. of $100,000 but not over $150,000 the tax is $23,820 plus 30 % over $100,000
T.I. of $150,000 but not over $250,000 the tax is $38,800 plus 32 % over $150,000
T.I. of $250,000 but not over $500,000 the tax is $70,800 plus 34 % over $250,000
T.I. of $500,000 the tax is $155,800 plus 35 % over $500,000 Any gift tax that you would owe is eliminated or reduced by a tax credit. The credit against taxable gifts for 2011 and 2012 is $1,730,800 effectively exempting $5 million of taxable estates.
Lifetime Federal Gift Tax Exclusion = $5,250,000
Lifetime GST Tax Exemption = $5,250,000
Important NOTE is that State exclusions may be different from above Federal amounts.
New for 2011 and 2012 is a concept named portability which allows a surviving spouse's estate to use any portion of the exemption amount not used by the other spouse’s estate.
For decedents and gifts made in the current year, a unified credit of $1,730,800 is allowed which is the equivalent of a $5,120,000 dollar exemption is subtracted from the tax calculated on the taxable estate.
These expenses cannot be claimed for both estate tax and income tax purposes.
Generally, this rule also applies to expenses incurred in the sale of property by an estate that is not considered a dealer.
Administration expenses include the fees paid to the fiduciary for administering the estate. It also includes the accountant, attorney and tax-return preparer fees. Also, expenses incurred for the production or collection of taxable income and expenses incurred for the management, conservation, or maintenance of property held for the production of taxable income.
It also can include any expenses in connection with the determination, collection, or refund of any tax.
If you give more than $14,000 to any person per year ($28,000 with your spouse), you will be subject to the Gift Tax.
If your gift to any person is in excess of $14,000 ($28,000 for married individuals) then you will have to file a Gift Tax return which is generally due April 15 of the year following the gift.
The amount of the gift in excess of $14,000 ($28,000 for married persons) will reduce your lifetime exemption for Estate Taxes by the amount of the excess.