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Estate Tax Returns Fell to All-Time Low

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By Michael Cohn
October 11, 2012

The number of estate tax returns filed has steadily declined since 2001, according to newly released statistics from the Internal Revenue Service, and hit an all-time low in 2010.

That shouldn’t be a major surprise since 2010 was also the year that the estate tax was not in effect because Congress could not agree on what to do about the exemption levels after the Bush tax cuts expired. What is perhaps surprising is that more than 15,000 estate tax returns were nevertheless filed in 2010. Less than half of the estates filing in 2010 owed any estate tax after accounting for marital and charitable bequests, along with expenses and debts of the estate. The combined estate tax obligation of these estates was over $13 billion, according to the IRS.

Overall, though, the number of estate tax returns filed has been on the wane since the Bush tax cuts passed, falling from more than 108,000 in 2001. For filing year 2010, estates with gross assets above the filing threshold reported over $130 billion in assets. Nearly 61 percent of 2010 estate tax decedents were male, the IRS noted. Just over half of all the decedents were married, while another 36 percent were widowed. Only 13 percent of decedents were single, divorced, or separated.

Over 97 percent of the estates of married decedents, and 48 percent of estates overall, reported deductions for marital bequests, for a total of $42 billion, according to the IRS. Only 9 percent of estates with a marital bequest owed estate tax.

Approximately 20 percent of estates claimed a charitable bequest deduction, for a total of $11.5 billion. Estates with $20 million or more in gross estate accounted for over 63 percent of this total, despite representing only 6 percent of filers.

Over the course of the decade, since 2001, the estate tax filing threshold has gradually increased from $675,000 for 2001 deaths to $3.5 million for 2009 deaths. Once Congress decided what to do about the estate tax in late 2010, it was reinstated on a retroactive basis with a $5.0 million exemption level and a top marginal tax rate of 35 percent.

It is anybody’s guess what it will be next year, but unless Congress acts, the exemption level will again fall to $1 million and the top estate tax rate will again jump to 55 percent. Along with all those other nagging “fiscal cliff” and “Taxmageddon” issues to decide, the estate tax is one of them.

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