** "The new law revives Republican efforts to repeal the estate tax | ThinkAdvisor"

"The important issue here is the income tax deduction, which is not mentioned," says financial expert Ed Slott.

Republican lawmakers have reintroduced a bill to permanently repeal the inheritance tax.

Sen. John Thune, the South Dakota Republican ranking member of the Subcommittee on Taxation and Internal Revenue Control, along with 40 of his Senate colleagues, including Republican Leader Mitch McConnell of Kentucky and Mike Crapo, ranking member of the Senate Finance Committee, 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 actually doubled "the individual exemption for inheritance and gift taxes to $10 million ($12.9 million in 2023) through 2025," Toon said in a statement, "which prevents the tax impact on more families and businesses passing down through the generations." The increased exemption expires at the end of 2025, Toon said, "which increases uncertainty and planning costs for family businesses, farms and ranches."

Slott's analysis

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 individual this year and $25,840,000 per married couple - most people don't pay [the] inheritance tax." However, he said, "these amounts should be halved after 2025. But still, the exemption will be high enough to protect over 99% of taxpayers from this tax. The real problem here is the income tax benefit, which is not mentioned" in Toon's statement, Slott explained.

"Most people (who have an inherited estate value below the inheritance tax exemption level) will benefit more from the tax benefit - an increase in the value base for appreciated assets such as their home and shares," he pointed out.

Toon's proposal "does not say whether the increase in the value base will be maintained even if the inheritance tax is repealed," Slott said. "Back in 2010, there was no inheritance tax, but there was a limited increase in the basis of value - which favorably affected many more people who owned appreciated stocks and real estate.

Other issues

Another bill introduced Jan. 13 by Rep. Bob Latta, an Ohio Republican, would also permanently repeal the inheritance tax and preserve the increase in the cost base at death.

Garrett Watson, a senior policy analyst at the Tax Foundation in Washington, D.C., told ThinkAdvisor in an email that Toon's proposal to repeal the inheritance tax "contributes to the long-term discussion about what direction the inheritance tax might go, 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 major changes to the inheritance tax if this proposal is enacted in the long term or if current policy is in place."

McConnell stated in his statement that "for a long time, the estate tax has caused irreparable harm" to farming families and small businesses. "The burden of this unfair and punitive tax can be devastating for families who want to pass on their hard-earned, labor-intensive standard of living to the next generation. Washington Democrats need to recognize the economic damage they have inflicted and join Republicans in repealing this harmful tax," he explained.

Krapo added that "high federal taxes should not hinder farmers, entrepreneurs, and savers - who have worked their whole lives to pass something on to the next generation - from passing their business on to their children. We need to continuously repeal this punitive tax, and I thank Senator Tuna for his years of effort."

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