Estate Tax Exemption: How Much It Is and How to Calculate It
Introduction
You may have heard about the “death tax,” more formally known as the estate tax. This tax is imposed on the transfer of a deceased person’s assets to their heirs. While the federal government imposes an estate tax, only estates above a certain value are subject to it. At DK Law Group, we’re here to help you understand the estate tax exemption and how to calculate it to ensure your estate plan protects your assets effectively.
What Is the Estate Tax Exemption?
The estate tax exemption is the amount of an estate’s value that is exempt from federal estate taxes. For 2024, the exemption amount is $12.92 million per individual, meaning that only the portion of an estate exceeding this amount is subject to federal estate tax.
How to Calculate Estate Tax
To calculate the estate tax, first determine the total value of the deceased person’s estate, including all assets like real estate, investments, and personal property. Subtract any debts and the estate tax exemption amount. The remaining balance is subject to the federal estate tax rate, which can be as high as 40%.
Real-Life Example
Consider an estate worth $15 million. After subtracting the $12.92 million exemption, $2.08 million remains taxable. Applying the federal estate tax rate, the estate could owe up to $832,000 in taxes. Proper estate planning can help reduce or even eliminate this tax burden, preserving more wealth for your heirs.
Conclusion
Understanding the estate tax exemption and how to calculate potential taxes is crucial for effective estate planning. At DK Law Group, we work with you to create a plan that minimizes estate taxes and ensures your assets are passed on according to your wishes. Contact us today to protect your legacy.
At DK Law Group, we take the complexity out of estate taxes so you can focus on what matters most—your family and future. We value your inquiries! Reach us by phone at (443) 739-6724 or email us at diana@dklawmd.com – we’ll be happy to assist you.