After more than a year’s worth of wrangling (and our yapping about it here and here), our elected officials in Washington finally made a deal to settle the uncertainty surrounding the estate tax. Naturally, they could not come to a long term agreement. But, they patched the hole, and at least until the end of 2012, we know what the federal tax will look like.
The estate tax now in place includes an exclusion of $5 million – that is, no estate worth less than $5 million is subject to the tax and estates worth more are not taxed on the first $5 million. The maximum tax rate for taxable estates is 35%. But, like the last time this deal came around, it isn’t permanent – it applies only through the end of 2012. Come January 1, 2013, the law reverts to its old formula, with a $1 million exclusion and a 55% top tax rate. It seems like a pretty safe bet, then, that we’ll be having this fight again at the end of next year.