Back to Estate Tax FAQ
|
Taxable Estate up to... |
Tax Rate |
Marginal Tax Amount |
Total Tax Amount |
| 10,000 | 18% | 1,800 | 1,800 |
| 20,000 | 20% | 2,000 | 3,800 |
| 40,000 | 22% | 4,400 | 8,200 |
| 60,000 | 24% | 4,800 | 13,000 |
| 80,000 | 26% | 5,200 | 18,200 |
| 100,000 | 28% | 5,600 | 23,800 |
| 150,000 | 30% | 15,000 | 38,800 |
| 250,000 | 32% | 32,000 | 70,800 |
| 500,000 | 34% | 85,000 | 155,800 |
| 750,000 | 37% | 92,500 | 248,300 |
| 1,000,000 | 39% | 97,500 | 345,800 |
| 1,250,000 | 41% | 102,500 | 448,300 |
| 1,500,000 | 43% | 107,500 | 555,800 |
| 2,000,000 | 45% | 225,000 | 780,800 |
The Lifetime Exemption in 2006
In the absence of the estate tax lifetime credit, every taxpayer would pay 18% of taxable estate value on the first $10,000 of estate value. The total tax of an estate with taxable value of $10,000 would be the value in the "Total Tax Amount" column: $10,000 times 18%, or $1,800. Since the estate tax has a progressive rate structure, however, the next $10,000 of taxable estate would be taxed at a higher rate: 20 percent. The "marginal tax amount"-- the tax imposed at the higher rate-- would be $10,000 times 20%, or $2,000. Added to the $1,800 in tax on the first $10,000 in estate value, the total tax amount on an estate with taxable value of $20,000 would be $3,800. So in this table, the final column represents the total amount of estate tax that would be owed (if there were no credit) for each value of an estate. As the table shows, an estate with taxable value of $2,000,000 would owe $780,800 in the absence of a credit. This means that the lifetime credit of $780,800 against estate and gift taxes is equivalent to a lifetime exemption of $2,000,000.
Note that the rates listed here are the nominal federal estate tax
rates, meaning they do not account for the credit against state estate taxes,
which effectively lowers the federal rate that is applicable.