The U.S. Is Giving Up On Taxing Inheritances

Congressional Republicans are proposing to permanently allow wealthy families to pass on more of their assets tax-free, as the federal government all but abandons taxing large inheritances.

Under current law, estates pay tax only on transfers above $13.99 million for single filers and $27.98 million for married couples. Those thresholds, doubled by President Donald Trump’s 2017 tax law, are scheduled to fall by roughly half at the end of 2025. But in the tax bill before Congress, both the House and Senate versions would raise the exemption starting next year to $15 million for individuals and $30 million for couples, then set them to adjust for inflation in the future.

Though they represent a small part of the overall costs of Trump’s tax bill, these changes are set to weaken an estate tax that already affects fewer households than it has in decades. When the federal estate tax was first imposed in 1934, roughly 8,600 deaths resulted in estate tax liability, or 0.9 percent of adult deaths. In 2019, the most recent year for which IRS data is available, only 2,100 deaths resulted in estate tax liability, or 0.08 percent of deaths. The proposed increases are expected to reduce that share even more.

“The estate tax is barely hanging on right now,” said Steve Wamhoff, federal policy director at the left-leaning Institute on Taxation and Economic Policy. “This bill would make sure it almost disappears.”