Most of the talk over the Fiscal Cliff imbroglio has been about marginal tax rates and cuts to defense and entitlement spending. But one other key part of the negotiations has been the estate tax. The tax rate for estates for last year was set at 35 percent, with an exemption for the first $5.2 million in an estate. But that is now set to change.
In the proposal that the House of Representatives passed late last night, the estate tax rate was raised to 40 percent, with an exemption level of $5 million. The 40 percent rate kicks in for people in the top tax bracket, which is $450,000 for married couples.
And in a crucial provision, and that $5 million exemption threshold will be indexed to inflation. That sort of flexibility indicates that these levels are intended to stick around for a while.
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