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Estate Tax Portability

Estate tax portability can provide significant tax savings for married couples. This article will assist in understanding the concept.

Home » Trust & Estate » Estate Tax Portability
Estate Tax Portability provided by CPA at Evans Sternau CPA

Estate tax portability is a term used to describe a special tax advantage that permits unused estate tax exemptions to be transferred from one spouse to the other after death. In simpler terms, if one spouse does not use their full estate tax exemption, they can transfer it to their surviving spouse, who can then add it to their own exemption.

To understand estate tax portability, it is essential to understand how the estate tax works in the United States. The estate tax is a tax on the transfer of property at death. When someone passes away, their estate is subject to an estate tax, which is based on the value of the assets they leave behind. However, there is an exemption amount that can be used to reduce or eliminate the amount of tax that must be paid.

The current federal estate tax exemption is very generous and set at $12.92 million per person in 2023. This means that an individual can pass up to $12.92 million worth of assets to their heirs without being subjected to estate tax. However, if their estate is valued above the exemption amount, they will be required to pay tax on the excess at a rate of up to 40%.

Before the introduction of estate tax portability in 2011, if one spouse died and their estate did not use the full exemption amount, that unused amount was lost. This meant that if the surviving spouse later passed away, their own estate tax exemption would only be limited to their own exemption amount, and they would not be able to use any unused exemptions from their late spouse’s estate.

Estate tax portability allows a surviving spouse to take advantage of any unused estate tax exemption from their late spouse’s estate. This can be a significant advantage, especially for couples with a large estate, as it can reduce or eliminate the tax liability on the second spouse’s estate, potentially saving the family a considerable amount of money.

To be eligible for estate tax portability, certain requirements must be met, including filing an estate tax return after the first spouse’s death, even if no tax is due. The process can be complicated, and it is advisable to consult with an attorney or tax professional to ensure that all requirements are met.

In conclusion, estate tax portability is an important tax benefit for spouses, allowing them to maximize their estate tax exemption and minimize their tax liability. While the rules surrounding portability can be complex, taking advantage of this provision can save a significant amount of money for heirs and beneficiaries.

About Evans Sternau CPA LLC

Evans Sternau CPA is seeking reform in an industry where responsiveness and availability are the exceptions – not the norm.

Our global network of committed CPAs and accountants places proactive thinking at the forefront of our work. With robust service offerings and client support strategies, we are always searching for opportunities to serve your best interests.

While our philosophy is rooted in tried and trusted methods, our execution surpasses the norm and redefines the standard.

Evans Sternau CPA provides proactive tax, accounting, and advisory services for business owners, entrepreneurs and individuals with complex tax challenges. Evans Sternau CPA is for those that want year round support, not just during tax season.

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Chris Sternau
CPA and co-founder of Evans Sternau CPA, Chris offers trusted tax and financial expertise, drawing on over a decade of experience with businesses, individual clients, and families.
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  • About
    • About Us
    • The ESCPA Difference
    • Client Testimonials
    • Careers
      • Work With Us
      • Partnership Program
  • Locations
    • Austin
    • Houston
    • The Woodlands
  • Insights
  • Business Services
    • Tax Advisory & Preparation
    • Accounting & Compliance
    • Outsourced CFO
    • Other Business Services
      • 1031 Exchange
      • Cost Segregation
      • Entity Selection
      • Foreign Tax Compliance
      • Mergers & Acquisitions
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      • Research & Development Tax Credits
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