When former President Donald Trump changed the estate tax in 2018 so that it only applied to the wealthiest individuals, collections dwindled—until last year.
Close to 2,600 estates paid $18.4 billion in taxes last year, which represents a 97% increase from 2020’s collection totals, Bloomberg reported. The jump is likely unique to 2021 because of higher death rates because of COVID-19, and an expansion of wealth as a result of stocks and real estate gains.
Of the 3.4 million people who died in 2020, only 0.08% had to pay the estate tax. But the death spike in 2020, caused in part by the first wave of the pandemic, continued into 2021.
Estate taxpayers for 2021 also collectively saw their properties, stock and private equity investments, and hedge fund assets become more valuable than they were the year before, before according to Bloomberg.
The huge increase in estate tax collection came down to just a fraction of Americans. Only 369 individuals paid 61% of the estate tax collection in 2021, Bloomberg reported, based on information from the Internal Revenue Service (IRS).
Trump’s estate tax was only applicable on assets valued above $11.18 million for individuals or $22.36 million for married couples. In 2023, those figures will rise further to $12.92 million and $26 million, respectively, after adjusting for inflation.
Since a majority of estates are too small and are often exempt from paying taxes, fewer people now pay the estate tax at all compared to how many did before 2018. In 2001, the limit for estate exclusion was $675,000. Economists at the Wharton School of Business believe that if this limit had remained in place without inflation-related changes until 2019, the federal government could have generated $85 billion in tax revenue during that time period, the Wall Street Journal reported earlier this month.
The estate exclusion will be reset to pre-2018 levels in 2026.
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