2009 Estate Tax and Gift Tax Exclusions Increase

February 18, 2009

The federal estate tax is a tax imposed on all transfers by a decedent, including probate and non-probate assets. The The unified credit, that is, the amount that is excluded from the estate tax, increased automatically to $3.5 million. The maximum tax rate on taxable transfers in excess of the unified credit remains at 45%.

Most same-sex couples (and most married couples) will never feel the bite of the federal estate tax. At the current exclusion, the Congressional Budget Office estimates only about 0.15% of all estates —only 3,676 estates — would be subject to the estate tax.

Same-sex couples, on the other hand, are most likely to be affected by the federal gift tax. Because of the federal Defense of Marriage Act (DOMA), same-sex couples are not eligible for the unlimited gift tax exclusion for gifts between spouses. As a result, transfers between same-sex spouses —even those who are married or in civil unions — must be reported to the extent that they exceed the federal exclusion in any one tax year.

The gift tax exclusion, which is adjusted for inflation, increased to $13,000 in 2009, up from $12,000 in 2008.

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