Center on Budget and Policy Priorities ri 820 Firer Street NE, Suite 510 Washington, DC 20002 Fax: www.cbpp.org Revised August 29, 2013 Myths and Realities About the Estate Tax By Chye-Ching Huang and Nathaniel Frentz The estate tax is a tax on property (cash, real estate, stock, or other assets) transferred from deceased persons to their heirs. Only the wealthiest estates in the country pay the tax because it is levied only on the portion of an estate's value that exceeds a specified exemption level, currently $5.25 million per person (effectively $10.5 million per married couple)) The estate tax thus limits, to a modest degree, the large tax breaks that extremely wealthy households get on their wealth as it grows, which can otherwise go completely untaxed. Though the estate tax has been an important source of federal revenue for nearly a century, a number of myths continue to surround it. Myth 1: The estate tax is best characterized as the "death tax." Reality: Everybody dies, but only the richest O.14 percent of estates pay any estate tax. The estate tax is best characterized as a tax on very large inheritances by a small group of wealthy heirs. Today, only the estates of the wealthiest 0.14 percent of Americans2 — fewer than 2 out of every 1,000 people who die — owe any estate tax whatsoever because of the high exemption amount, which has more than quadrupled since 2001. Only 1.4 out of every 1,000 estates (0.14%) will owe any estate tax in 2013 according to the Tax Pollry Center ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ MMMMMEMMMMMEMEMMMWMMOMMEMMMMMMMEMMI MMMMMEMMMMEMMMEMMMMEMMEMMMEMEMMMMMMEMIM MMMMMEMMMEMMMEMMEMMMMEMMEMMMEMMMMMMMWI MMMEMMEMMEMMEMMEMMEMMEMMEMMEMMEMMMEMMEM MMEMMEMMEMMEMMEMMEMMMMEMMMMEMMMMMMMMEMM MIMMEMOMMOMMIMMIMMEMMMOIMMOMMIMMOMMMIMMO IIMMMIMMIMMWIMMWMEMIIMMWMIMMIMMIIWO IMMOMMIIIIIMMOMMOMMOMMIIIIIMMOMMIMMIWOMMM IIIIMMOMMOMMOIMOMMOMMEMMWMIMMOMMIMMMOMMI MIMMMMEMEMMMMWMMMMMEMMMMMMMEMMMMMMEMM MMMMMEM