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Is the Estate Tax Going to Be Repealed?

The short-term answer is “yes.” The Economic Growth and Tax Relief Reconciliation Act of 2001 made sweeping changes to the federal estate tax and eliminated the tax entirely in 2010.

However, because the tax legislation is scheduled to expire after December 31, 2010, the federal estate tax will return to its original 50 percent maximum rate in 2011 unless Congress acts to make the repeal permanent.

Estate taxes are levied by the federal government and several states on any property that passes from the dead to the living. All estate assets are subject to federal estate taxes. However, the applicable credit shelters a portion of an estate from federal estate taxes.

The following table illustrates changes to the applicable credit and the top federal estate tax rate from 2002 through 2011.

Year	Applicable Credit	Top Estate Tax Rate
2002	$1 million	50%
2003	$1 million	49%
2004	$1.5 million	48%
2005	$1.5 million	47%
2006	$2 million	46%
2007	$2 million	45%
2008	$2 million	45%
2009	$3.5 million	45%
2010	Tax repealed	0%
2011	$1 million	50%

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

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