The Death Tax

Death and Taxes. All of us have heard the saying about the two things we cannot avoid. We have big changes coming up concerning the death tax. I know it’s hard to believe, but the changes coming up in estate taxes can actually influence a person’s decision to live or die. You may ask how is it possible for taxes to influence a person’s choice to live or die.

Well the federal estate tax, also commonly called the death tax, which was repealed in 2010, is making a comeback in 2011 with a lower exemption and a higher tax rate.

Death Tax 2011 Example

Here’s an example of how the death tax works. Let’s say a man dies who has a taxable estate of $5 million. If he died in the year of 2009 his tax liability would be $675,000. If he died in 2010 his tax liability would be $0. I know this seems impossible, but it’s true. Now, if he died in 2011 his tax liability would be $2 million.

If a wealthy person was on life support towards the end of 2010 the death tax could influence family members to end life support before January 1, 2011. I suppose a wealthy individual may refuse medical help for a terminal illness to speed the inevitable if it meant more money would be left for the surviving heirs.

Death Tax Rate at 55% for 2011

The federal estate tax will be 55% on estates valued at more than $1 million. In 2011 the death tax will go back to the $1million exemption and any taxable income beyond $1 million will be taxed at 55%. This just doesn’t seem fair considering they earned the money and paid the taxes while they were working. Now their heirs will have to pay tax again on money that was already taxed.

Questions about the Death Tax for 2011

Many of us have questions about the death tax and how it affects our inheritance. You may have inherited stock, cash, an IRA, savings bonds, or a trust and are wondering how the federal inheritance tax will affect your final outcome. If you do have questions about the death tax, you will find a lot of answers at an online tax preparation service such as TurboTax Online.

All you have to do is click on the support tab and enter death tax 2011 into the search box. You will have many professional tax articles written by tax experts in their award winning tax library. If you have an inheritance and need information about how to fill out your income tax return, then visit TurboTax Online and discover the best way to keep your cash in your hands and out of Uncle Sam’s.