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Here Are the 2020 Estate Tax Rates

By Dan Caplinger – Nov 11, 2019 at 2:05AM

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Find out what you can expect your heirs to pay after your death.

Concerns about wealth and income inequality have gotten a lot of attention lately in Washington and on the campaign trail, and some believe that having wealthier Americans pay more in taxes  would help address those concerns. In addition to some ideas for new wealth-based taxes, some policymakers have looked at the federal estate tax as a potential vehicle to collect more from rich families.

Currently, the federal estate tax system looks complicated, with a long set of tax rates applying to various brackets based on how much your assets are worth at your death. Yet because of the way the tax is structured, very few people ever have to pay estate tax. As in most years, the amount of wealth you can have without paying estate tax is set to go up slightly in 2020, but that won't stop discussions from happening about whether more fundamental changes should happen.

The 2020 estate tax rates

As we saw last year, there was no change to the 12 brackets of the estate tax for 2020:

For Taxable Estates in This Range

You'll Pay This Base Amount of Tax

Plus This Rate on the Excess Above the Lower End of the Range

$0 to $10,000



$10,000 to $20,000



$20,000 to $40,000



$40,000 to $60,000



$60,000 to $80,000



$80,000 to $100,000



$100,000 to $150,000



$150,000 to $250,000



$250,000 to $500,000



$500,000 to $750,000



$750,000 to $1 million



$1 million and up



Data source: IRS.

At first glance, you might think this means that just about anybody would owe estate tax. Technically, there is tentative estate tax liability for even the smallest taxable estates. For instance, the chart above would suggest that a $15,000 estate would have tentative tax of $2,800.

Why most people don't pay any estate tax

But there's another step to the calculation. After determining the tentative estate tax, just about everyone receives a unified gift and estate tax credit. That number goes up every year, and it translates into a certain amount of money that you're allowed to transfer to your heirs without having to pay any estate tax.

Estate planning worksheet with a pen on top.

Image source: Getty Images.

The starting point is the basic exclusion amount. That number is used to calculate the size of the credit against estate tax. For 2020, the basic exclusion amount will go up $180,000 from 2019 levels to a new total of $11.58 million.

Then, you take the $11.58 million number and figure out what the estate tax on that amount would be under the current set of tax rates. Take $345,800 and add in 40% of the $10.58 million excess, and you get a total unified credit of $4,577,800. That's up $72,000 from what it was for those who passed away in 2019.

All that sounds convoluted, but the real takeaway is that if you have less than $11.58 million in assets, you don't have to worry about estate tax in 2020. And even if you are that wealthy, there are still things you can do to prevent tax problems after your death.

A few ways to cut your estate tax liability

The general idea in estate tax planning is reducing the amount of assets you own. That typically involves making gifts, but the idea behind the unified gift and estate tax system is to make sure you don't just give away everything on your death bed to avoid tax.

However, there are several types of gifts you can make without running into tax problems. You can give up to $15,000 in 2020 to as many different people as you want, and you can make unlimited gifts to charity or to your spouse. Gifts that you make to cover educational or medical expenses are also free of gift and estate tax, as long as you directly pay the educational or medical institution rather than running the money through the person whose bills you want to pay.

Things to keep in mind

High federal estate tax credits mean most people won't owe tax, but that's not necessarily the case at the state level. In many states, the threshold for worrying about estate tax is a lot less than $11.58 million.

Moreover, with all the talk in Washington about potential new taxes, there's no guarantee that the basic exclusion amount will stay that high. In the past, levels have been much lower, leading to more people potentially owing estate tax. By knowing the rules, you'll be able to navigate the tax as effectively as possible and keep more money for your loved ones.

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