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Estate Tax Exemption Amount Goes Up for 2022

As the estate tax exemption amount increases, fewer estates are subject to the federal tax.

The federal estate tax exemption is going up again for 2022. The amount is adjusted each year for inflation, so that’s not a surprise. But it’s still a big deal when the new exemption is announced each year because there’s a lot at stake for certain high-income Americans.

2022 Estate Tax Exemption

Generally, when you die, your estate is not subject to the federal estate tax if the value of your estate is less than the exemption amount. For people who pass away in 2022, the exemption amount will be $12.06 million (it’s $11.7 million for 2021). For a married couple, that comes to a combined exemption of $24.12 million.

Estate Tax Rate

As you might guess, only a small percentage of Americans die with an estate worth $11.7 million or more. But for estates that do, the federal tax bill is pretty steep. Most of the estate’s value is taxed at a 40% rate.

Rate Taxable Amount (Value of Estate Exceeding Exemption)
18% $0 to $10,000
20% $10,001 to $20,000
22% $20,001 to $40,000
24% $40,001 to $60,000
26% $60,001 to $80,000
28% $80,001 to $100,000
30% $100,001 to $150,000
32% $150,001 to $250,000
34% $250,001 to $500,000
37% $500,001 to $750,000
39% $750,001 to $1 million
40% Over $1 million

Historical Estate Tax Exemption Amounts

Since the federal estate tax was reformed in 1976, the estate tax exemption has only gone up (see table below). In most cases, the increase is modest, such as a simple adjustment for inflation. However, at times, the exemption amount has jumped considerably. For example, it shot up from $675,000 to $1 million in 2002, from $1 million to $5 million in 2011, and from $5.49 million to $11.18 million in 2018.

But that pattern is scheduled to change. The 2018 estate tax examption increase is only temporary, so the base exemption amount is set to drop back down to $5 million (adjusted for inflation) in 2026.

Period Exemption Amount
1977 (Quarters 1 and 2) $30,000
1977 (Quarters 3 and 4) $120,667
1978 $134,000
1979 $147,333
1980 $161,563
1981 $175,625
1982 $225,000
1983 $275,000
1984 $325,000
1985 $400,000
1986 $500,000
1987 through 1997 $600,000
1998 $625,000
1999 $650,000
2000 and 2001 $675,000
2002 through 2010 $1,000,000
2011 $5,000,000
2012 $5,120,000
2013 $5,250,000
2014 $5,340,000
2015 $5,430,000
2016 $5,450,000
2017 $5,490,000
2018 $11,180,000
2019 $11,400,000
2020 $11,580,000
2021 $11,700,000
2022 $12,060,000

State Estate Taxes

Just because your estate isn’t hit with the federal estate tax, that doesn’t necessarily mean you’re completely off the hook. Your estate might be subject to a state estate tax. Twelve states and the District of Columbia impose their own estate tax, and the state exemption amounts are often much lower than the federal estate tax exemption. For instance, the exemption amount in Massachusetts and Oregon is only $1 million.

Plus, six states levy an inheritance tax, which is paid directly by your heirs. (Maryland has both an estate tax and an inheritance tax!) So, just because your estate isn’t worth millions of dollars, you children and grandchildren might end up with less in their pockets when you die than what you’re expecting.
Read more related articles at:

New Higher Estate And Gift Tax Limits For 2022: Couples Can Pass On $720,000 More Tax Free

The wealthy now have more time to avoid estate taxes, thanks to an IRS change

Also, read one of our previous Blogs, here:

What Exactly Is the Estate Tax?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.


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