Estate & Gift Tax Planning
Tax & AccountingMarch 09, 2021

Historical Look at Estate and Gift Tax Rates

MAXIMUM ESTATE TAX RATES (1916–2021)

In effect from September 9, 1916, to March 2, 1917   

   10% of net estate in excess         of $5 million

In effect from March 3, 1917, to October 3, 1917

   15% of net estate in excess         of $5 million

In effect from October 4, 1917, to 6:55 p.m. EST, February 24, 1919 

   Basic estate tax of 15% of net     estate in excess of $5 million     plus war estate tax of 10% of     net estate tax in excess of
   $10 million

In effect after 6:55 p.m. EST, February 24, 1919, to 10:25 a.m.  EST, February 26, 1926

   25% of net estate in excess         of $10 million

In effect after 10:25 a.m. EST, February 26, 1926, to 5 p.m. EST, June 6, 1932

   20% of net estate in excess       of $50 million1

In effect after 5 p.m. EST, June 6, 1932, to May 10, 1934

   45% of net estate in excess
   of $50 million
1

In effect from May 11, 1934, to August 30, 1935

   60% of net estate in excess
   of $50 million
1

In effect from August 31, 1935, to June 25, 1940

   70% of net estate in excess
   of $50 million
1

Estates of decedents dying after June 25, 1940, but    before September 21,1941

   70% of excess of net estate       over $10 million1 plus
   a defense tax of 10% of the
   total tax computed under
   the basic and
   additional estate taxes
   (in effect, maximum tax was       77%)

Estates of decedents dying after September 20, 1941,   
but before August 17,
1954 

   77% of excess of net estate         over $10 million1

Estates of decedents dying after August 16, 1954, but before 1977

   77% of excess over $10 million

Estates of decedents dying after 1976 but before1982

   70% of excess over $5 million

Estates of decedents dying in1982

   65% of excess over $4 million

Estates of decedents dying in1983

   60% of excess over
   $3.5 million

Estates of decedents dying after 1983 and before 1988

   55% of excess over $3 million

Estates of decedents dying after 1987 and before1998

   55% of excess over $3 million     (effectively 60% for estates       in excess of $10 million
   but less than $21,040,000
   because of a surtax to phase     out benefits of
   the graduated rates and             unified credit)

Estates of decedents dying in 1998 through 2001 

   55% of excess over $3 million     (effectively 60% for estates       in excess of $10 million but       less than$17,184,000 because     of surtax to phase out                 benefits of only the
   graduated rates)

Estates of decedents dying in 2002

   50% of excess over $2.5               million2

Estates of decedents dying in 2003

   49% of excess over $2 million

Estates of decedents dying in 2004

   48% of excess over $2 million

Estates of decedents dying in 2005

   47% of excess over $2 million

Estates of decedents dying in 2006 

   46% of excess over $2 million

Estates of decedents dying in 2007 and 2008

   45% of excess over $2                 million3

Estates of decedents dying in 2009

   45% of excess over $3.5               million

Estates of decedents dying in 2010

   35% of excess over $5 million     and stepped-up basis
   for inherited assets,                   or 
election for no estate
   tax, but carryover basis for         inherited assets
4

Estates of decedents dying in 2011

   35% of excess over $5 million5

Estates of decedents dying in 2012

   35% of excess over $5,120,000     (as adjusted for inflation)5

Estates of decedents dying in 2013

   40% of excess over
   $5,250,000 (as adjusted for         inflation)
6

Estates of decedents dying in 2014

   40% of excess
   over $5,340,000 (as adjusted     for inflation)
6

Estates of decedents dying in 2015

   40% of excess over                     $5,430,000 (as adjusted for         inflation)6

Estates of decedents dying in 2016

   40% of excess over                     $5,450,000 (as adjusted for          inflation)6

Estates of decedents dying in 2017

   40% of excess over                     $5,490,000 (as adjusted for          inflation)6

Estates of decedents dying in 2018

   40% of excess over                     $11,180,000 (to be adjusted         for inflation using Chained         CPI)7

Estates of decedents dying in 2019

   40% of excess over                     $11,400,000 (as adjusted for       inflation using Chained CPI)7

Estates of decedents dying in 2020 

   40% of excess over                     $11,580,000 (as adjusted for       inflation using Chained CPI)7

Estates of decedents dying in 2021

   40% of excess over 

   $11,700,000 (as adjusted             for inflation using Chained         CPI)7

 

For Estate Taxes:

1 Estate tax was composed of a basic estate tax plus an additional estate tax; in effect, estates never paid more than the amount of the additional estate tax.

2 Beginning in 2002, the surtax on estates in excess of $10 million is repealed. In addition, the maximum estate tax rate began to decrease, while the applicable exclusion amount for estate tax purposes (i.e., the lifetime amount shielded from estate tax) began to increase. During the years 2002 through 2009, the estate tax applicable exclusion amount was $1 million in 2002 and 2003, $1.5 million in 2004 and 2005, $2 million in 2006 through 2008, and $3.5 million in 2009.

3 Although the estate tax rate schedule for 2007 through 2009 (Code Sec. 2001) shows the 45% rate being imposed on estates in excess of $1.5 million, the estate tax applicable exclusion amount effectively precludes taxation of any transfers in an amount below $2 million in 2006 through 2008 and $3.5 million in 2009.

4 The Tax Relief, Unemployment Reauthorization and Job Creation Act of 2010, reinstated the estate tax effective for decedents dying after December 31, 2009. However, the Tax Relief Act of 2010 also provided an election for the estates of decedents dying in 2010 to use the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) rules of no estate tax, but a carryover basis for inherited assets. Accordingly, few estates of decedents dying in 2010 will actually be subject to the estate tax. In addition, although the estate tax rate schedule for 2010 through 2012 (Code Sec. 2001) shows the 35% rate being imposed on estates in excess of $500,000, the estate tax applicable exclusion amount effectively precludes taxation of any transfers in an amount below $5 million in 2010 and 2011, and $5,120,000 in 2012.

5 Beginning in 2011, the Tax Relief Act of 2010 allows a surviving spouse to utilize the unused portion of the applicable exclusion amount (as otherwise increased under the Act) of his or her last predeceased spouse. An election by the predeceased spouse’s estate is required.

6 The Tax Relief Act of 2010 reinstated the estate tax at a lower rate and a higher exclusion amount than would have been the case if the sunset called for under EGTRRA had occurred. However, the Tax Relief Act of 2010 was only to apply to estates through 2012. It was scheduled to sunset in 2013, leaving the law as if EGTRRA and the Tax Relief Act of 2010 had never been passed. The American Taxpayer Relief Act of 2012 struck the sunset provisions of EGTRRA and the 2010 Tax Relief Act, thus making the changes enacted by those laws permanent. The 2012 American Taxpayer Relief Act also raised the maximum estate tax rate to 40%. Although the estate tax rate schedule for 2013 and beyond (Code Sec. 2001) shows the 40% rate being imposed on estates in excess of $1,000,000, the applicable exclusion amount effectively precludes taxation of any transfers in an amount below $5,490,000 in 2017 (it was $5,450,000 in 2016, $5,430,000 in 2015, $5,340,000 in 2014, and $5,250,000 in 2013).

7 The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) doubled the basic exclusion amount to $10,000,000, as adjusted for inflation. It also altered the methodology for computing inflation adjustment amounts in the Internal Revenue Code to use the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).

 

MAXIMUM GIFT TAX RATES (1924–2021)

1924–1925

40% on transfers in excess of $10 million over the course of the donor’s lifetime

1926–June 6, 1932

No gift tax imposed (repealed by the Revenue Act of 1926)

June 7, 1932–1934

33.5% on transfers in excess of $10 million over the course of the donor’s lifetime

1935

45% on transfers in excess of $10 million over the course of the donor’s lifetime

1936–1940

52.5% on transfers in excess of $50 million over the course of the donor’s lifetime

1941

52.5% on transfers in excess of $50 million over the course of the donor’s lifetime, plus a defense tax of 10% of the total tax computed (in effect, maximum tax was 57.75%)

1942–1976

57.75% on transfers in excess of $10 million over the course of the donor’s lifetime

1977–1981

70% of transfers in excess of $5 million over the course of the donor’s lifetime

1982

65% of transfers in excess of $4 million over the course of the donor’s lifetime

1983

60% of transfers in excess of $3.5 million over the course of the donor’s lifetime

1984–1987

55% of transfers in excess of $3 million over the course of the donor’s lifetime

1988–1997

55% of transfers in excess of $3 million over the course of the donor’s lifetime (effectively 60% for transfers in excess of $10 million but less than $21,040,000 because of a surtax to phase out the benefits of the graduated rates and unified credit)

1998–2001

55% of transfers in excess of $3 million over the course of the donor’s lifetime (effectively 60% for transfers in excess of $10 million but less than $17,184,000, because of a surtax to phase out the benefits of only the graduated rates)

2002

50% of transfers in excess of $2.5 million over the course of the donor’s lifetime

2003

49% of transfers in excess of $2 million over the course of the donor’s lifetime

2004

48% of transfers in excess of $2 million over the course of the donor’s lifetime1

2005

47% of transfers in excess of $2 million over the course of the donor’s lifetime

2006

46% of transfers in excess of $2 million over the course of the donor’s lifetime

2007–2009

45% of transfers in excess of $1.5 million over the course of the donor’s lifetime

2010

35% of transfers in excess of $1 million over the course of the donor’s lifetime2

2011

35% of transfers in excess of $5 million over the course of the donor’s lifetime3

2012

35% of transfers in excess of $5,120,000 (as adjusted for inflation) over the course of the donor’slifetime3

2013

40% of transfers in excess of $5,250,000 (as adjusted for inflation) over the course of the donor’slifetime4

2014

40% of transfers in excess of $5,340,000 (as adjusted for inflation) over the course of the donor’slifetime4

2015

40% of transfers in excess of $5,430,000 (as adjusted for inflation) over the course of the donor’slifetime4

2016

40% of transfers in excess of $5,450,000 (as adjusted for inflation) over the course of the donor'slifetime4

2017

40% of transfers in excess of $5,490,000 (as adjusted for inflation) over the course of the donor'slifetime4

2018

40% of transfers in excess of over $11,180,000 (as adjusted for inflation using Chained CPI)5

2019

40% of transfers in excess of $11,400,000 (as adjusted for inflation using Chained CPI)5

2020

40% of transfers in excess of $11,580,000 (as adjusted for inflation using Chained CPI)5

2021

40% of transfers in excess of $11,700,000 (as adjusted for inflation using Chained CPI)5

 

For Gift Taxes:

1 Beginning in 2004, the applicable exclusion amount for gift tax purposes (i.e., the lifetime amount shielded from gift tax) differed from the amount used for estate tax purposes. During the years 2002 through 2010, the gift tax applicable exclusion amount remained constant at $1 million, while the estate tax applicable exclusion amount was $1 million in 2002 and 2003, $1.5 million in 2004 and 2005, $2 million in 2006 through 2008 and $3.5 million in 2009.

2 Although the gift tax rate schedule for the years 2010 through 2012 (Code Sec. 2502) shows the 35% rate being imposed on transfers in excess of $500,000, the gift tax applicable exclusion amount effectively precludes taxation of any transfers in an amount below $1 million in 2010, $5 million in 2011 and $5,120,000 in 2012.

3 Beginning in 2011, the Tax Relief Act of 2010 allows a surviving spouse to utilize the unused portion of the applicable exclusion amount (as otherwise increased under the Act) of his or her last predeceased spouse. An election by the predeceased spouse's estate is required.

4 The Tax Relief Act of 2010 lowered the top tax rate and increased the exclusion amount to $5 million compared to what would have been the case if the transfer tax provisions of EGTRRA had been allowed to sunset as planned. However, the Tax Relief Act of 2010 was only to apply to gift taxes through 2012. It was scheduled to sunset in 2013, leaving the law as if EGTRRA and the Tax Relief Act of 2010 had never been passed. The American Taxpayer Relief Act of 2012 struck the sunset provisions of EGTRRA and the 2010 Tax Relief Act, thus making the changes enacted by those laws permanent. The 2012 Taxpayer Relief Act also raised the maximum gift tax rate to 40%. Although the gift tax rate schedule for 2013 and beyond (Code Sec. 2502 by reference to Code Sec. 2001) shows the 40% rate being imposed on gifts in excess of $1,000,000, the applicable exclusion amount effectively precludes taxation of any transfers in an amount below $5,490,000 in 2017, (it was $5,450,000 in 2016, $5,430,000 in 2015, $5,340,000 in 2014, and $5,250,000 in 2013).

5 The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) doubled the basic exclusion amount to $10,000,000, as adjusted for inflation. It also altered the methodology for computing inflation adjustment amounts in the Internal Revenue Code to use the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).

Source: Wolters Kluwer CCH® AnswerConnect, 2021
Permission for use granted.

Mark Luscombe
Principal Federal Tax Analyst
Mark Luscombe, a CPA and attorney, is the principal federal tax analyst for Wolters Kluwer Tax & Accounting. He is the current chair of the Important Developments Subcommittee of the Partnership Committee of the American Bar Association Tax Section and speaks on a wide range of tax topics. He authors monthly columns in Accounting Today and TAXES magazine. Prior to joining Wolters Kluwer, he was in private practice with several Chicago-area law firms where he specialized in taxation.