What Percentage Of People Are Required To Pay The Estate Tax?

A big part of estate planning is preparing your finances so that you can leave the most for the people who care about. Estate taxes are a concern for a lot of people. This raises an important question: How many people are actually required to pay the estate tax? The short answer is that very few people face federal estate tax liability, but significantly more face state-based estate tax liability in Massachusetts. Within this article, our Boston estate planning attorney highlights key things to know about the estate tax, including how many people are actually required to pay.

Background: What is the Estate Tax? 

The estate tax is a federal tax applied to the transfer of property at death, based on the net value of the deceased’s estate. It is sometimes referred to pejoratively as the “death tax.” Notably, not everyone pays it. Quite the contrary, it only affects estates that exceed certain thresholds. 

Very Few Estate have Federal Estate Tax Liability

Will you have to pay federal estate tax liability? The answer is probably not. As of 2024, very few estates will pay any estate tax. According to the most recent data from the Tax Policy Center, 2.8 million people passed away in the United States in 2022. Of those, only around 7,000 estates (0.25 percent) were required to file an official federal estate tax return. However, of those 7,000 estates, only around 3,950 actually had to pay the federal estate tax. The bottom line is that around 1 in 725 people who pass away in the U.S. have federal estate tax liability.

There is a High Federal Estate Tax Exemption, but it Could Change Soon

The reason that so few estates pay estate tax at the federal level is that, in 2024, the exemption is set at $13,610,000. In other words, the first $13.6 million of an estate does not pay any federal estate tax. On December 31st, 2025, federal law is set to change that the estate tax exemption will revert to around $7 million—meaning more people (but still relatively few) will be subject to the estate tax. With that being said, lawmakers could extend the current level before the change occurs.

Significantly More Estate Have Massachusetts State Estate Tax Liability 

Some U.S. jurisdictions have their own state-level estate tax. Massachusetts is one of the most notable examples. Many more estates have to pay Massachusetts estate tax than federal estate tax. The Massachusetts estate tax exemption is $2 million. The Massachusetts estate tax rate is progressive—meaning larger estates may pay a higher tax rate.

Speak to an Estate Planning Attorney in Massachusetts Today

At Fisher Law LLC, our Massachusetts estate planning lawyers are a diligent, experienced advocate for clients. If you have any questions about estate tax planning, please do not hesitate to contact us today for a completely confidential, no obligation consultaion. Our firm provides solutions-focused estate planning services throughout the Greater Boston area.

Source:

taxpolicycenter.org/briefing-book/how-many-people-pay-estate-tax#:~:text=To%20put%20the%20number%20of,will%20pay%20any%20estate%20tax