Estate Tax

The federal estate tax provides strong incentives to people to donate from their estates to charitable organizations and thereby encourages the donation of significant revenues to support services and programs that are vital to sustaining healthy communities and the well-being of Americans of all ages.

Current status
As a result of the American Taxpayer Relief Act of 2012 (H.R. 8) the federal estate tax is permanently set with a $5.12 million individual exemption (indexed for inflation) and 40 percent top rate.

Congress should return the federal estate tax to levels that preserve incentives to give back to the community through charitable bequests, minimize adverse effects on federal revenues, and protect farms and small businesses.

Independent Sector called on Congress to preserve this critical tax incentive for philanthropic giving by ensuring that any modifications to the tax did not raise the exemption level or lower the tax rates beyond the 2009 levels ($3.5 million exemption; 45 percent rate).


Estate Tax as a Charitable Giving Incentive
The Congressional Budget Office has estimated that repealing the estate tax would reduce charitable bequests by 16 to 28 percent. The tax has been a critical incentive for wealthy Americans to support the work of charitable organizations that improve the quality of life in our communities.

  • The Congressional Budget Office found that the estate tax leads affluent individuals to donate far more than they otherwise would, because such donations sharply reduce estate tax liability.
  • Giving through charitable bequests totaled $24.2 billion in 2011 – 8% of total giving.
Estate Tax as Federal Revenue

  • The estate tax is a vital source of revenue for the federal government, and at this time of record deficits and crippling debt, we cannot afford to lose tens of billions of dollars in revenue each year.
  • Repeal of the estate tax would result in the loss of over $1 trillion in tax revenues for federal government over the next ten years.

Who is Subject to the Estate Tax?

  • Fewer than 3 in every 1,000 estates were subject to the estate tax in 2009.
  • Extending the estate tax at 2009 levels would shield virtually all farm and small businesses from tax liability.
    • A Congressional Budget Office study found that of the few farms and small businesses that would owe an estate tax liability in 2009, an overwhelming majority would have significant liquid assets to pay the tax without touching the farm or business.

REPORTS and resources

Center on Budget and Policy Priorities (CBPP) Report on the Estate Tax
CBPP released a report on May 26, 2011 calling on Congress to allow the current estate tax regime to expire at the end of 2012. The report concludes that weakening the tax beyond the 2009 levels is unaffordable and unnecessary given the country's financial circumstances.

Urban Brookings Tax Policy Center
The Tax Policy Center provides a number of resources detailing the estate tax's revenue impact and potential options for reform.

Congressional Budget Office - The Federal Estate and Gift Tax
CBO published a brief in December 2009 with statistics on taxpayers claiming estate and gift taxes.

Congressional Budget Office - The Estate Tax and Charitable Giving
CBO issued a report in July 2004 examining the estate tax and its incentive effect on charitable giving.

Join IS Today