If president-elect Donald Trump follows through on his campaign promises, the estate tax will be eliminated. Currently, the rules are straightforward: A married couple is exempt for the first $10.9 million in their estate, and they pay a 40 percent tax on the amount above that. Mr. Trump’s campaign proposal seems straightforward: Repeal the estate tax — the "death tax" in his words. There is a second part to his plan which involves keeping taxes on capital gains over $10 million when family assets are sold.
Back in 2012, most tax experts considered the estate tax resolved when the Republican-majority Congress and President Obama reached a so-called grand bargain on taxes. As part of that deal, the current estate tax exemption was set, with annual increases indexed to inflation. With that agreement, more than 99 percent of Americans were exempted from the estate tax. Last year, for example, the IRS processed just 4,918 federal estate tax returns. Few families have more than $10.9 million in their estate.
But Mr. Trump’s proposal is not a simple repeal. His plan also said, “Capital gains held until death and valued over $10 million will be subject to tax to exempt small businesses and family farms.” In other words, the tax on capital gains above $10 million would have to paid only when, or if, the assets were sold.