The new law strengthens Republican efforts to repeal the inheritance tax.

Financial expert Ed Slott says the real issue here is the income tax benefit, which is not mentioned in the bill.

The bill to repeal inheritance tax

Republican lawmakers have reintroduced a bill to permanently repeal the inheritance tax. Sen. John Thune, ranking member of the Subcommittee on Taxation and Oversight of Internal Revenue, along with 40 Senate colleagues, including Republican Leader Mitch McConnell and Finance Committee ranking member Mike Crapo, introduced the Inheritance Tax Repeal Act of 2023 on Thursday. Thune introduced similar bills in 2017 and 2019. The Tax Cuts and Jobs Act of 2017 did not repeal the inheritance tax, but it did effectively double "the individual exemption from the inheritance and gift tax to $10 million ($12.9 million in 2023) through 2025," Toon said in a statement, "which prevents more families and legacy businesses from being impacted by this tax." The increased exemption expires at the end of 2025, Toon said, "which increases uncertainty and planning costs for family businesses, farms and ranches. "

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Ed Slott of Ed Slott and Co. said in an email to ThinkAdvisor on Tuesday that because the inheritance tax exemption is so high - $12,920,000 per person this year and $25,840,000 for a married couple - most people don't pay inheritance tax. However, "these amounts should be halved after 2025. Still, the exemption will be high enough to protect over 99% of taxpayers from this tax. The real issue here is the income tax benefit, which is not mentioned" in Toon's statement, Slott explained.

Other issues

Another bill introduced Jan. 13 by Rep. Bob Latta of Ohio would also permanently repeal the inheritance tax and maintain the increase in the asset appreciation base at death. Garrett Watson, a senior policy analyst at the Tax Foundation in Washington, D.C., said in an email to ThinkAdvisor that Toon's proposal to repeal the inheritance tax "promotes a long-term discussion about what direction the inheritance tax might take, but this bill will not pass the Senate or be signed by a President who favors tightening inheritance tax rules or even raising them." The existing inheritance tax exemption thresholds, Watson explained, "automatically decrease starting in 2026, from about $13 million this year to about $7 million in 2026, so we could see big changes to the inheritance tax if this proposal is enacted over the long term or if current policy is in place. "

McConnell said in a statement that "for a long time, the inheritance tax has been seriously damaging" to farm families and small businesses. "The burden of this unfair and punitive tax can be devastating for families who want to pass their earned living to the next generation. Washington Democrats must recognize the economic damage they have caused and join Republicans in ending this harmful tax," he explained. Crapo added that "high federal taxes should not prevent farmers, entrepreneurs and savers - who have worked their entire lives to pass something on to the next generation - from passing their company on to their children. We need to permanently repeal this punitive tax, and I thank Senator Toon for his years of effort. "

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