House Republicans this week reintroduced legislation to permanently repeal what they’re calling the “death tax” — or federal estate tax, which is levied on inherited property above a certain value.
Introduced by Rep. Randy Feenstra, R-Iowa, with support from 162 lawmakers, the Death Tax Repeal Act follows past Republican proposals to abolish estate taxes, including a Senate bill from early 2023.
“Families who spend a generation building up a successful farm, ranch or small business should be rewarded — not punished — by our tax code,” House Ways and Means Committee Chairman Jason Smith, R-Mo., said in a statement Thursday, applauding the bill.
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However, there hasn’t been bipartisan support for repealing the estate tax, and it’s unlikely to be enacted via the current split Congress, experts say.
“It seems like it’s largely a messaging play here where they’re trying to keep these ideas in the forefront,” said Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation. “It’s a reminder especially as we approach the 2025 discussion.”
The federal estate tax exemption adjusted for inflation by rising to $13.61 million per individual or $27.22 million for spouses in 2024. Estates can owe up to 40% levies on anything above that.
But those limits will drop by roughly one-half after 2025 when provisions sunset from former president Donald Trump‘s 2017 signature tax overhaul.
“Because the revenue effects are relatively small, they may have more leeway to eliminate [the estate tax] altogether if they had full control,” Watson said.
Who pays the federal estate tax
“In a sense, [the federal estate tax] has already been repealed,” said Robert McClelland, senior fellow at the Urban-Brookings Tax Policy Center, noting that most Americans aren’t affected by the levy.
In 2019, roughly 2,100 tax returns — representing 0.08% of adult U.S. deaths — were subject to federal estate taxes, according to the latest IRS data.
“It’s not something that should worry the average American” or even the average wealthy American, McClelland said.
While some Republicans say the federal estate tax puts a burden on family farms and small businesses, most aren’t affected, he said.
For 2022, the U.S. Department of Agriculture’s Economic Research Service estimated that 0.22% of 39,534 farms with principal operator deaths would owe estate taxes. Of course, the need for estate tax returns largely depends on the farm size, USDA noted.
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