The 2010 Tax Relief Act

At the end of 2010 Congress and the President passed and signed into law the 2010 Tax Relief Act. The law brought many changes to America's tax code, including the federal estate tax. Specifically, the federal exemption level was changed.

The federal exemption level is that amount at which a decedent's estate is subject to filing a federal estate tax return and possibly paying a federal tax. In 2010 there was no federal estate tax. However, until the 2010 Tax Relief Act was signed, the federal estate tax would have returned January 1, 2011, at a level of $1 million. Under this new law the exemption level was raised, to $5 million with an upper tax rate of 35%.

One limitation of the 2010 Tax Relief Act is that it pertains to the years 2011 and 2012; it is set to expire 12-31-12 unless Congress takes action. If the law expires, the federal exemption will be $1 million, with a top tax rate of 55%.

Thanks to R. Chistian Davis, Vice President, Private Client Group, US Bank, Madison, Wisconsin, for discussing this information at the 45th Annual CLEW Tax Workshop, presented by the University of Wisconsin Law School.

Remember, a blog is for discussion, and is not a substitute for legal or tax advice. Please consult your attorney and or tax person for advice specific to your situation.