Federal Estate Tax Exemption refers to the amount of an individual’s estate that is exempt from federal estate taxes upon their death. This exemption is periodically adjusted for inflation and can change with new legislation.
As of 2023, the exemption amount is set at $12.92 million per individual. This means that if the total value of an individual’s estate is below this threshold, no federal estate tax will be owed. If the estate exceeds this exemption limit, only the amount above the exemption will be subject to taxation at the federal estate tax rate, which can be as high as 40%.
For example, if an individual passes away with an estate valued at $15 million, only $2.08 million would be subject to federal estate tax, assuming the exemption is $12.92 million.
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