Calculating Estate Tax Liability During the Estate Tax Phasedown Period 2001-2009

CRS Report for Congress
Calculating Estate Tax Liability During the
Estate Tax Phasedown Period 2001-2009
Updated April 1, 2005
Nonna A. Noto
Specialist in Public Finance
Government and Finance Division

Congressional Research Service ˜ The Library of Congress

Calculating Estate Tax Liability During the Estate Tax
Phasedown Period 2001-2009
Summary
This report provides a basic explanation of how to calculate the federal estate
tax liability for a taxable estate of any given size, using the schedule of marginal tax
rates and the applicable credit amount for the year of death. The amount of any
person’s taxable estate that is free from tax is known formally as the applicable
exclusion amount or informally as the exemption.
The applicable exclusion amount is not subtracted from the net taxable estate,
as an exemption or deduction would be. Rather, it is converted into a tax credit equal
to the tax that would be due on a taxable estate the size of the applicable exclusion
amount. Unlike a deduction, which is worth more to taxpayers in higher marginal
tax rate brackets, the applicable credit amount is worth the same regardless of the
estate’s top marginal tax brackets.
To determine the estate tax liability, first calculate the tentative tax that would
be due on the entire taxable estate from the marginal tax rate table for the year of
death. Then, subtract the applicable credit amount for the year of death from the
tentative tax to determine the net tax due.
A numerical example is presented in the text and in a worksheet for a $5
million taxable estate of a decedent dying in 2005. A blank worksheet is provided
for readers to make their own calculations. For 2004 and 2005 the applicable
exclusion amount — or estate tax exemption — is $1.5 million. The corresponding
applicable credit amount is $555,800.
The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16,
EGTRRA) gradually lowered the maximum estate tax rate and substantially raised
the applicable exclusion amount — and thus the corresponding applicable credit
amount — over the years 2002 through 2009. The tables in the appendix to this
report present the marginal estate tax rates and the applicable exclusion amount for
each year of this phasedown period. The maximum tax rate fell from 55% on a
taxable estate over $3 million (plus a 5% surtax from $10 million to $17 million)
under prior law in 2001, to 50% on a taxable estate in excess of $2.5 million in 2002.
It was then scheduled to fall by one percentage point per year, down to 45% on
amounts in excess of $1.5 million in 2007-2009. The applicable exclusion amount
rose from $675,000 in 2001, to $1 million in 2002 and 2003, and $1.5 million in

2004 and 2005. It is scheduled to rise further to $2 million in 2006 through 2008,

and to $3.5 million in 2009.
EGTRRA repealed the estate tax for decedents dying in 2010. However, all of
the provisions under the act are scheduled to sunset on December 31, 2010. Unless
changed beforehand, in 2011 the law will revert back to what it would have been had
EGTRRA never been enacted. The first table in the appendix presents the marginal
tax rates that applied in 2001 prior to EGTRRA and that would apply again in 2011
and beyond. However, in 2011 and after, the applicable exclusion amount would be
$1 million, in contrast to $675,000 in 2001. This report will not be updated.

Contents
Applicable Exclusion Amount and Applicable Credit Amount..............1
Marginal Tax Rates................................................3
Calculating Estate Tax Liability.......................................4
Cautionary Notes..................................................6
Appendix A. Federal Estate Tax Rate Schedules for 2001 through 2009 and
2011 and Beyond..............................................8
List of Tables
Table 1. Applicable Exclusion Amount and Corresponding Applicable
Credit Amount, 2001 to 2011 and Beyond..........................3
Table 2. Sample Calculation of Estate Tax Liability for a Taxable
Estate of $5,000,000 of a Decedent Dying in 2005....................5
Table 3. Worksheet for Calculating Estate Tax Liability...................6
Table A.1. Federal Estate Tax Rate Schedule for 2001 and Again for
2011 and Beyond..............................................9
Table A.2. Federal Estate Tax Rate Schedule for 2002...................10
Table A.3. Federal Estate Tax Rate Schedule for 2003...................11
Table A.4. Federal Estate Tax Rate Schedule for 2004...................12
Table A.5. Federal Estate Tax Rate Schedule for 2005...................13
Table A.6. Federal Estate Tax Rate Schedule for 2006...................14
Table A.7. Federal Estate Tax Rate Schedule for 2007 and 2008...........15
Table A.8. Federal Estate Tax Rate Schedule for 2009...................16

Calculating Estate Tax Liability During the
Estate Tax Phasedown Period 2001-2009
This report provides a basic explanation of how to calculate the federal estate
tax liability on a taxable estate of any given size. It uses the schedule of marginal
estate tax rates and the applicable exclusion amount, as provided in the Internal
Revenue Code, and the corresponding applicable credit amount for the year of death.
The report does not address how to determine the value of the taxable estate
except to note that deductions from the gross estate are permitted for funeral
expenses, costs of administering the estate, debts and mortgages owed, charitable
bequests, and bequests to the surviving spouse. Nor does the report explain the
accompanying tax on gifts made during a person’s lifetime or the generation-skipping
transfer tax.¹
The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16,
EGTRRA, pronounced egg-tra) phased out the federal estate tax over the years 2002-
2009. EGTRRA lowered the top marginal estate tax rate gradually and raised the
applicable exclusion amount (and consequently the corresponding applicable credit
amount) in large increments over the phasedown period. EGTRRA repealed the
estate tax for decedents dying in 2010. But the estate tax repeal, and all other
provisions of EGTRRA, are scheduled to sunset on December 31, 2010.² Unless
changed beforehand, in 2011 the law will revert to what it would have been had
EGTRRA never been enacted.
Applicable Exclusion Amount and
Applicable Credit Amount
It is common parlance to say that a certain amount of a decedent’s assets are
“free from,” “excluded from,” or “exempt from” the estate tax. However, the
“applicable exclusion amount” is not subtracted from the value of the (net) taxable
estate before applying the schedule of tax rates, as a true exemption or deduction

¹ For more information about these topics, see CRS Report RL30600, Estate and Gift Taxes:
Economic Issues, by Jane G. Gravelle and Steven Maguire and CRS Report 95-416, Federal
Estate, Gift, and Generation, Skipping Taxes: A Description Of Current Law, by John R.
Luckey.
² For a fuller explanation of the estate tax provisions in EGTRRA, see CRS Report
RL31061, Estate and Gift Tax Law: Changes Under the Economic Growth and Tax Relief
Reconciliation Act of 2001, by Nonna A. Noto; and CRS Report RS20989, Federal Estate,
Gift, and Generation-Skipping Transfer Taxes: Modification, Phase Out and Repeal Under
the Economic Growth And Tax Relief Reconciliation Act of 2001, by John R. Luckey.

would be. Instead, the exclusion amount is converted into a tax credit known as the
“applicable credit amount.” The credit is equal to the tax that would be due on a
taxable estate the size of the applicable exclusion amount for the year of death. This
tax credit is subtracted from the “tentative tax” liability on the entire taxable estate.
Unlike a deduction, which is worth more to taxpayers in higher marginal tax rate
brackets, the applicable credit amount is worth the same dollar amount regardless of
the estate’s top tax brackets. However, the credit is non-refundable. That is, it
cannot reduce estate tax liability below zero. Consequently, taxable estates that are
smaller than the applicable exclusion amount are not able to take full advantage of
the available credit.
The applicable exclusion amount also serves as the tax filing threshold. An
estate tax return must be filed if the gross value of the estate exceeds the applicable
exclusion amount for the year of death. This filing requirement holds even if the
estate’s taxable value falls below this amount after subtracting eligible deductions,
such that no estate tax is owed.³
Table 1 presents the applicable exclusion amount and the corresponding
applicable credit amount for each year from 2001 until 2011 and beyond. In 2001,
prior to EGTRRA, the applicable exclusion amount was $675,000. It was scheduled
to rise gradually to $1 million for 2006 and beyond, under provisions of the Taxpayer
Relief Act of 1997 (P.L. 105-34, TRA) . EGTRRA raised the applicable exclusion
amount to $1 million immediately for 2002 and 2003. It raised the amount further
to $1.5 million for 2004 and 2005, $2 million for 2006-2008, and finally $3.5 million
for 2009. It repealed the estate tax for 2010 only. If the sunset provision of
EGTRRA is not repealed, or the law is not otherwise changed beforehand, in 2011
estate tax law will return to what it would have been had EGTRRA not been enacted.
Under the provisions of TRA of 1997, that would mean an applicable exclusion
amount of $1 million for the years 2011 and beyond, not $675,000.
The applicable credit amount was calculated by CRS by using the estate tax rate
schedule to determine the tentative tax on a taxable estate the size of the applicable
exclusion amount. For the estates of decedents dying in 2004 or 2005, the applicable
credit amount is $555,800, corresponding to the estate tax on an applicable exclusion
amount of $1.5 million. For 2006-2008, the applicable credit amount is scheduled
to rise to $780,800, corresponding to the estate tax on an applicable exclusion
amount of $2 million. For 2009, the applicable credit amount is $1,455,800,
corresponding to the estate tax on $3.5 million. For 2011 and beyond, the applicable
credit amount is scheduled to return to $345,800, the amount in effect for 2002-2003,
corresponding to the estate tax on $1 million (and not to the credit of $220,550 in
effect for 2001, corresponding to the estate tax on $675,000).

³ Less than half of estate tax returns filed in 1998 through 2003 were taxable. For additional
information, see CRS Report RL32768, Estate and Gift Tax Revenues: Several
Measurements, by Nonna A. Noto.

Table 1. Applicable Exclusion Amount and Corresponding
Applicable Credit Amount, 2001 to 2011 and Beyond
(In the case of estates ofApplicable credit amount
decedents dying, andApplicable(Equal to the tentative estate tax on the
gifts made, during)exclusioncorresponding applicable exclusion
Calendar yearamountamount)
2001 $675,000 $220,550
2002-20031,000,000 345,800
2004-20051,500,000 555,800
2006-20082,000,000 780,800
2009 3,500,000 1,455,800
2010Estate tax repealed
2011 and beyond1,000,000345,800
^So^urce^s^:^T^h^e^a^p^plⁱ^cabl^e^ex^cl^u^sⁱ^oⁿ^am^ouⁿ^tⁱ^s^f^r^om^S^ectⁱ^oⁿ^{2010(c) of}^t^h^{e In}^t^e^rn^al^R^e^v^eⁿ^u^e^C^ode.
^T^h^{e applicable credit am}^ouⁿ^t^w^a^s^calcu^{lated by}^C^R^S.
Marginal Tax Rates
Appendix A presents the graduated schedule of federal estate and gift tax rates
for each year from 2001 through 2009. As an example here, we will use the rates that
apply to a decedent dying in 2005, shown in Table A.5. Rising marginal tax rates
apply to different portions of an estate. The statutory rates range from 18% for the
taxable value of estates below $10,000, up to 47% for taxable value over $2 million.
In practice for 2005, however, the lowest marginal estate tax rate affecting the
value of deductions or increments to the estate is not 18%, but 45%. This is the rate
corresponding to taxable estate values in the range over $1.5 million but not over $2
million. The maximum marginal rate for 2005 is 47% on taxable estate values over
$2 million. The applicable exclusion amount for 2005 exempts from tax the first
$1.5 million in taxable estate per decedent. The exclusion is emphasized by gray
shading over the first 13 rows of Table A.5. These rows encompass taxable estate
values from $0 to $1.5 million, and the corresponding statutory marginal tax rates
from 18% to 43%. An explanatory row is inserted in the table to indicate where the
applicable exclusion amount for 2005 of $1.5 million falls within the graduated rate
table.

Calculating Estate Tax Liability
The steps involved in calculating the net estate tax liability on a taxable estate
of any given size are laid out in the worksheet shown in Tables 2 and 3. Table 2
contains a numerical example for an estate with a taxable value of $5 million for a
decedent dying in 2005. Table 3 is a blank worksheet provided for readers to make
their own calculations.
Two basic steps are involved in calculating the estate tax liability. The first is
to calculate the “tentative tax” due on a taxable estate of the size in question, based
on the tax rate schedule in the appropriate table in Appendix A for the year of death.
The second is to subtract from the tentative tax the applicable credit amount for the
year of the decedent’s death, shown in the last column of Table 1.
Calculating the tentative tax, in turn, includes four steps. The first is finding in
the tax rate table the amount of tax due at the bottom of the bracket in which the
estate value falls. The second is calculating the amount of estate in excess of the
bottom of the bracket. The third is multiplying that excess amount by the marginal
tax rate to determined the additional tax. The fourth is adding that additional tax to
the tax due at the bottom of the bracket.
In Table 2 the value of the taxable estate — $5 million — is entered in line 1,
column (A). To determine the tentative tax on the estate of a decedent dying in 2005,
look down the first column of Table A.5 and find the bracket that encompasses the
taxable value of the estate. For an estate of $5 million, that is the top bracket
beginning with $2 million. Column (c) of the last row of Table A.5 shows that the
tax on $2 million is $780,800. This equals the sum of the taxes due from all of the
preceding brackets in the table. Enter this amount in line 2, column B.
Next, calculate the amount of the estate in excess of $2 million, the bottom of
the tax rate bracket. In column (A) subtract line 2 from line 1 and enter the
difference of $3 million on line 3. This $3 million is taxed at a marginal rate of 47%,
as shown in the last row of Table A.5. Enter 0.47 on line 4. Multiply line 4 (0.47)
times line 3 ($3,000,000). Enter the resulting additional tax of $1,410,000 on line
5 in column (A) and again in column (B). In column (B), add the additional tax of
$1,410,000 on line 5 to the $780,800 on line 2 and enter a total “tentative tax” of
$2,190,800 on the $5 million estate on line 6.
Next, find the applicable credit amount corresponding to the year of the
decedent’s death, in the last column of Table 1. For a person dying in 2005, the tax
credit is $555,800. Enter this amount on line 7. This corresponds to the tax that
would be due on an estate of $1.5 million, the applicable exclusion amount for 2005.
Subtract the applicable credit amount of $555,800 on line 7 from the tentative tax of
$2,190,800 on line 6 and enter the resulting net estate tax liability of $1,635,000 on
line 8. The tax of $1,635,000 on a taxable estate of $5 million represents an average
tax rate of 33%.

Table 2. Sample Calculation of Estate Tax Liability for a Taxable
Estate of $5,000,000 of a Decedent Dying in 2005
(A)
Estate value ($)(B)
and marginalTax liability
LineInstructiontax rate (%)($)
1.Enter value of taxable estate.$5,000,000XX
2.Find the bracket for this taxable value in the
appropriate appendix Table A. Enter the
bottom of the bracket from Table A, col. (a), in2,000,000$780,800
col. (A) here. Enter the tax on the bottom of the
bracket from Table A, col. (c), in col. (B) here.
3.Calculate amount of estate in excess of bottom3,000,000XX
of bracket: (line 1 - line 2) in col. (A).(line 1 - line 2)
4.Enter the marginal tax rate for the bracket, from0.47XX
Table A, col. (d), in col. (A) here.
5.Calculate tax on amount in excess of bottom of1,410,0001,410,000
bracket (line 3 x line 4) in col. (A). Enter again(line 3 x line 4)(copy)
in col. (B).
6.Calculate tentative tax before creditXX2,190,800
(line 2 + line 5) in col. (B).(line 2 + line 5)
7.Enter applicable credit amount from XX555,800 for
Table 1, for year of death, in col. (B).2005
8.Calculate estate tax due (line 6 - line 7) in col.XX1,635,000
(B). Do not enter less than zero.(line 6 - line 7)
Notes: XX = intentionally left blank. Author’s example in bold.

Table 3. Worksheet for Calculating Estate Tax Liability
(Enter numbers in blank cells, following the instructions. For an example, see Table

2.)

(A)
Estate value ($)(B)
and marginalTax liability
LineInstructiontax rate (%)($)
1.Enter value of taxable estate.XX
2.Find the bracket for this taxable value in the
appropriate appendix Table A. Enter the
bottom of the bracket from Table A, col. (a), in
col. (A) here. Enter the tax on the bottom of
the bracket from Table A, col. (c), in col. (B)
here.
3.Calculate amount of estate in excess of bottom(line 1 - line 2)XX
of bracket: (line 1 - line 2) in col. (A).
4.Enter the marginal tax rate for the bracket,XX
from Table A, col. (d), in col. (A) here.
5.Calculate tax on amount in excess of bottom of
bracket (line 3 x line 4) in col. (A). Enter^a(line 3 x line 4)(copy)
again in col. (B).

6.Calculate tentative tax before creditXX(line 2 + line 5)

(line 2 + line 5) in col. (B).
7.Enter applicable credit amount from XX
Table 1, for year of death, in col. (B).

8.Calculate estate tax due (line 6 - line 7) in col.XX(line 6 - line 7)

(B). Do not enter less than zero.
^No^tes:^{XX = in}^ten^tioⁿ^a^lly^lef^t^b^l^an^k^.
^{a. O}ⁿ^lⁱⁿ^{e 5,}^f^o^r²⁰⁰¹^an^d^f^o^r^2011an^d^bey^oⁿ^d^,^add^{a 5%}^s^u^rt^ax^on^t^h^{e t}^a^x^a^bl^{e v}^a^l^u^{e of}^es^t^a^t^e^s^ov^er
^{$10 m}^illion^u^p^to^$17.184^m^illion^.
Cautionary Notes
Readers are warned that this report provides a highly simplified explanation of
calculating the estate tax. Other tax credits can affect the final federal estate tax
liability. Prior to EGTRRA an estate could claim a credit (subject to a limit) for state
death taxes paid on the estate. EGTRRA phased out the state tax credit by 25
percentage points per year from 2002 through 2004. In 2005 the credit was replaced
with a deduction. Credits may still be claimed for foreign death taxes and for federal
estate taxes paid on property that was transferred to the decedent within the past 10
years (subject to phaseout limits).

From 1998 through 2003 estates with qualified family-owned business interests
(QFOBI) could claim a special deduction of up to $675,000 that could reduce the
value of their applicable exclusion amount to $625,000. EGTRRA repealed this
special deduction as of 2004 when the applicable exclusion amount for all estates
reached $1.5 million. This surpassed the $1.3 million in combined deduction and
exclusion previously available only to estates with qualified family-owned business
interests.
Under EGTRRA the estate and gift taxes remain unified through 2009. The
amount of lifetime gifts that claim the gift tax exclusion is subject to a cumulative
lifetime limit of $1 million for 2002 and thereafter. The exclusion claimed for
taxable lifetime gifts is subtracted to determine the applicable exclusion amount
remaining available to a person’s estate at death. The amount of taxable lifetime
gifts is included in the base used to calculate the tentative estate tax (including gifts
affects where the estate falls in the marginal tax rate schedule). However, the estate
is then credited for taxes previously paid on taxable lifetime gift transfers. In 2010
the gift tax will remain in place when the estate tax is repealed. The lifetime
applicable exclusion amount for gifts will remain at $1 million. The maximum rate
of tax will be 35% on cumulative gifts over $500,000. Finally, a separate tax is
levied on generation-skipping transfers through 2009.

Appendix A. Federal Estate Tax Rate Schedules for
2001 through 2009 and 2011 and Beyond
During the phasedown period for the estate tax, from 2002 through 2009, the
provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L.
107-16, EGTRRA) gradually reduce the maximum estate tax rate and substantially
raise the applicable exclusion amount. The tables in this appendix present the
changes year-by-year. The graduated rates from 18% to 43% established under prior
law continue to apply to estate values up to $1.5 million. The maximum estate tax
rate dropped from 55% on taxable estate values over $3 million (plus a 5% surtax in
a specified range over $10 million) in 2001 under prior law, to 50% on taxable
estates over $2.5 million in 2002. The maximum tax rate continues to drop by one
percentage point per year, down to 45% on taxable estate values over $1.5 million
in 2007-2009. Notes at the bottom of each table summarize any reduction in the
maximum estate tax rate or increase in the applicable exclusion amount scheduled
to take effect that year.
There is an explanatory row in each table indicating the applicable exclusion
amount for that year of death. Taxable estate values up to the applicable exclusion
amount are protected from tax by the unified tax credit for the year. The marginal
tax rates that affect the value of deductions from, or increments to, the estate are
those above the exclusion amount. The applicable exclusion amount of $2 million
for 2007-2008 and $3.5 million for 2009 will fall within the top marginal tax rate
bracket of 45%, which will begin at estate values over $1.5 million.
The tax rates presented in Table A.1 are the rates that were in effect prior to
enactment of EGTRRA. They continued to apply to the estates of decedents who
died in 2001. They are also the rates that will be reinstated in 2011 if EGTRRA is
allowed to sunset on December 31, 2010. One notable difference is that the
applicable exclusion amount will be $1 million for 2011 and beyond, in contrast to
$675,000 in 2001, under a provision of the Taxpayer Relief Act of 1997 (P.L. 105-

34).

The estate tax rate schedules for 2002-2009 presented in this appendix were
created by CRS. The tax rate schedule under prior law, from Section 2001(c)(1) of
the Internal Revenue Code, was adapted according to the information presented in
the new Section 2001(c)(2). Section 2001(c)(2) sets forth the reduction in maximum
estate tax rates scheduled by EGTRRA.

Table A.1. Federal Estate Tax Rate Schedule for 2001 and
Again for 2011 and Beyond
Taxable EstateTentative Tax
(a) (b) (c) (d)
Bottom ofTop ofTax on bottomMarginal tax rate on bracket
bracketbracketof bracket
Plus: Rate of tax on amount over
OverButNot OverTax on amountin column (a)bottom of bracket, in column (a),
up to top of bracket, in column (b)
$ 0$ 10,000$0 +18% of such amount
10,00020,0001,800 +20% of excess over $10,000
20,00040,0003,800 +22% of excess over 20,000
40,00060,0008,200 +24% of excess over 40,000
60,00080,00013,000 +26% of excess over 60,000
80,000100,00018,200 +28% of excess over 80,000
100,000150,00023,800 +30% of excess over 100,000
150,000250,00038,800 +32% of excess over 150,000
250,000500,00070,800 +34% of excess over 250,000
Applicable Exclusion Amount was $675,000 for 2001
500,000750,000155,800 +37% of excess over 500,000
750,0001,000,000248,300 +39% of excess over 750,000
Applicable Exclusion Amount will be $1,000,000 for 2011 and beyond
1,000,0001,250,000345,800 +41% of excess over 1,000,000
1,250,0001,500,000448,300 +43% of excess over 1,250,000
1,500,0002,000,000555,800 +45% of excess over 1,500,000
2,000,0002,500,000780,800 +49% of excess over 2,000,000
2,500,0003,000,0001,025,800 +53% of excess over 2,500,000
over 3,000,000 — 1,290,800 +55% of excess over 3,000,000
Special range for 5% surtax to phase out the benefit of graduated tax rates
10,000,00017,184,000maximum5% surtax means a 60% marginal tax
surtax: 5% xrate in this range
$7,184,000 =
$359,200
^No^te^{: T}^h^es^{e are th}^{e tax}^rates^th^{at w}^e^{re in}^ef^f^{ect prior to en}^actm^eⁿ^t^of^th^e^Econ^om^ic^Grow^th^an^{d T}^a^x
^R^e^lⁱ^e^f^A^c^t^of^{2001 (P.L}^{. 107-}^{16, EG}^T^R^R^A^).

Table A.2. Federal Estate Tax Rate Schedule for 2002
Taxable EstateTentative Tax
(a) (b)(c)(d)
Bottom ofTop ofTax on bottomMarginal tax rate on bracket
bracketbracketof bracket
Tax on Plus: Rate of tax on amount over
OverButNot Overamount bottom of bracket, in column (a), up
in column (a)to top of bracket, in column (b)
$ 0$ 10,000$0 +18% of such amount
10,00020,0001,800 +20% of excess over $10,000
20,00040,0003,800 +22% of excess over 20,000
40,00060,0008,200 +24% of excess over 40,000
60,00080,00013,000 +26% of excess over 60,000
80,000100,00018,200 +28% of excess over 80,000
100,000150,00023,800 +30% of excess over 100,000
150,000250,00038,800 +32% of excess over 150,000
250,000500,00070,800 +34% of excess over 250,000
500,000750,000155,800 +37% of excess over 500,000
750,0001,000,000248,300 +39% of excess over 750,000
Applicable Exclusion Amount was $1 Million for 2002
1,000,0001,250,000345,800 +41% of excess over 1,000,000
1,250,0001,500,000448,300 +43% of excess over 1,250,000
1,500,0002,000,000555,800 +45% of excess over 1,500,000
2,000,0002,500,000780,800 +49% of excess over 2,000,000
2,500,000 — 1,025,800 +50% of excess over 2,500,000
^No^te:^In^2002,^t^h^e⁵^%^sur^t^a^x^w^a^s^repeal^{ed, as}^w^e^{re t}^a^x^rat^e^sⁱⁿ^ex^ces^s^of^50%^{. In}^{2002, t}^h^e
^m^a^xⁱ^m^u^m^r^a^te^w^a^s⁵⁰^%^oⁿ^tax^a^b^l^e^am^o^uⁿ^t^s^o^v^er^$²^.⁵^m^illioⁿ^.^T^h^{e ap}^p^licab^{le ex}^clu^s^ioⁿ^am^o^uⁿ^t^r^o^se
^f^r^om^{$675,000 in}^{2001 u}ⁿ^d^{er prior law}^{to $1 m}^illionⁱⁿ^{2002 u}ⁿ^d^{er EGT}^R^R^A^.

Table A.3. Federal Estate Tax Rate Schedule for 2003
Taxable EstateTentative Tax
(a)(b)(c)(d)
Bottom ofTop ofTax on bottomMarginal tax rate on bracket
bracketbracketof bracket
Tax on Plus: Rate of tax on amount over
OverBut Not Overamount bottom of bracket, in column (a),
in column (a)up to top of bracket, in column (b)
$ 0$ 10,000$0 +18% of such amount
10,00020,0001,800 +20% of excess over $10,000
20,00040,0003,800 +22% of excess over 20,000
40,00060,0008,200 +24% of excess over 40,000
60,00080,00013,000 +26% of excess over 60,000
80,000100,00018,200 +28% of excess over 80,000
100,000150,00023,800 +30% of excess over 100,000
150,000250,00038,800 +32% of excess over 150,000
250,000500,00070,800 +34% of excess over 250,000
500,000750,000155,800 +37% of excess over 500,000
750,0001,000,000248,300 +39% of excess over 750,000
Applicable Exclusion Amount was $1 Million for 2003
1,000,0001,250,000345,800 +41% of excess over 1,000,000
1,250,0001,500,000448,300 +43% of excess over 1,250,000
1,500,0002,000,000555,800 +45% of excess over 1,500,000
2,000,000 — 780,800 +49% of excess over 2,000,000
^No^te:^In^{2003, t}^a^x^rat^e^s^abov^{e 49%}^w^e^{re repeal}^{ed. T}^h^{e t}^a^x^rat^e^on^t^a^x^a^bl^{e es}^t^a^t^e^v^a^l^u^es^ov^{er $2.5}
^m^illioⁿ^f^e^{ll f}^r^o^m⁵⁰^%^to⁴⁹^%^{. T}^h^{e ap}^p^licab^{le ex}^clu^s^ioⁿ^am^o^uⁿ^t^r^e^m^aⁱⁿ^ed^{at $}¹^m^illioⁿ^.

Table A.4. Federal Estate Tax Rate Schedule for 2004
Taxable EstateTentative Tax
(a)(b)(c)(d)
Bottom ofTop ofTax on bottomMarginal tax rate on bracket
bracketbracketof bracket
Tax on Plus: Rate of tax on amount over
OverBut Not Overamount bottom of bracket, in column (a),
in column (a)up to top of bracket, in column (b)
$ 0$ 10,000$0 +18% of such amount
10,00020,0001,800 +20% of excess over $10,000
20,00040,0003,800 +22% of excess over 20,000
40,00060,0008,200 +24% of excess over 40,000
60,00080,00013,000 +26% of excess over 60,000
80,000100,00018,200 +28% of excess over 80,000
100,000150,00023,800 +30% of excess over 100,000
150,000250,00038,800 +32% of excess over 150,000
250,000500,00070,800 +34% of excess over 250,000
500,000750,000155,800 +37% of excess over 500,000
750,0001,000,000248,300 +39% of excess over 750,000
1,000,0001,250,000345,800 +41% of excess over 1,000,000
1,250,0001,500,000448,300 +43% of excess over 1,250,000
Applicable Exclusion Amount was $1.5 Million for 2004
1,500,0002,000,000555,800 +45% of excess over 1,500,000
2,000,000 — 780,800 +48% of excess over 2,000,000
^No^te:^In^{2004, t}^a^x^rat^e^s^above⁴⁸^%^w^e^r^e^repeal^{ed. T}^h^{e t}^a^x^rat^e^on^t^a^x^a^bl^{e es}^t^a^t^e^v^a^l^u^es^ov^{er $2}
^m^illioⁿ^f^e^{ll f}^r^o^m⁴⁹^%^to⁴⁸^%^.^T^h^{e ap}^p^licab^{le ex}^clu^s^ioⁿ^am^o^uⁿ^t^r^o^{se f}^r^o^m^$¹^m^illioⁿ^to^$¹^.⁵^m^illioⁿ^.

Table A.5. Federal Estate Tax Rate Schedule for 2005
Taxable EstateTentative Tax
(a)(b)(c)(d)
Bottom ofTop ofTax on bottomMarginal tax rate on bracket
bracketbracketof bracket
Tax on Plus: Rate of tax on amount over
OverBut Not Overamount bottom of bracket, in column (a),
in column (a)up to top of bracket, in column (b)
$ 0$ 10,000$0 +18% of such amount
10,00020,0001,800 +20% of excess over $10,000
20,00040,0003,800 +22% of excess over 20,000
40,00060,0008,200 +24% of excess over 40,000
60,00080,00013,000 +26% of excess over 60,000
80,000100,00018,200 +28% of excess over 80,000
100,000150,00023,800 +30% of excess over 100,000
150,000250,00038,800 +32% of excess over 150,000
250,000500,00070,800 +34% of excess over 250,000
500,000750,000155,800 +37% of excess over 500,000
750,0001,000,000248,300 +39% of excess over 750,000
1,000,0001,250,000345,800 +41% of excess over 1,000,000
1,250,0001,500,000448,300 +43% of excess over 1,250,000
Applicable Exclusion Amount is $1.5 Million for 2005
1,500,0002,000,000555,800 +45% of excess over 1,500,000
2,000,000 — 780,800 +47% of excess over 2,000,000
^No^te:^In^{2005, t}^a^x^rat^e^s^above⁴⁷^%^w^e^r^e^repeal^{ed. T}^h^{e t}^a^x^rat^e^on^t^a^x^a^bl^{e es}^t^a^t^e^v^a^l^u^es^ov^{er $2}
^m^illioⁿ^f^e^{ll f}^r^o^m⁴⁸^%^to⁴⁷^%^{. T}^h^{e ap}^p^licab^{le ex}^clu^s^ioⁿ^am^o^uⁿ^t^r^e^m^aⁱⁿ^ed^{at $}¹^.⁵^m^illioⁿ^.

Table A.6. Federal Estate Tax Rate Schedule for 2006
Taxable EstateTentative Tax
(a)(b)(c)(d)
Bottom ofTop ofTax on bottomMarginal tax rate on bracket
bracketbracketof bracket
Tax on Plus: Rate of tax on amount over
OverBut Not Overamount bottom of bracket, in column (a), up
in column (a)to top of bracket, in column (b)
$ 0$ 10,000$0 +18% of such amount
10,00020,0001,800 +20% of excess over $10,000
20,00040,0003,800 +22% of excess over 20,000
40,00060,0008,200 +24% of excess over 40,000
60,00080,00013,000 +26% of excess over 60,000
80,000100,00018,200 +28% of excess over 80,000
100,000150,00023,800 +30% of excess over 100,000
150,000250,00038,800 +32% of excess over 150,000
250,000500,00070,800 +34% of excess over 250,000
500,000750,000155,800 +37% of excess over 500,000
750,0001,000,000248,300 +39% of excess over 750,000
1,000,0001,250,000345,800 +41% of excess over 1,000,000
1,250,0001,500,000448,300 +43% of excess over 1,250,000
1,500,0002,000,000555,800 +45% of excess over 1,500,000
Applicable Exclusion Amount will be $2 Million for 2006
2,000,000 — 780,800 +46% of excess over 2,000,000
^No^te:^In^{2006, tax}^rates^abov^{e 46% w}^{ill be repealed. T}^h^e^tax^{rate on}^es^{tate v}^a^lu^es^ov^{er $2 m}^illion
^w^{ill f}^a^{ll f}^r^o^m⁴⁷^%^to⁴⁶^%^.^T^h^{e ap}^p^licab^{le ex}^clu^s^ioⁿ^am^o^uⁿ^t^w^{ill r}ⁱ^{se f}^r^o^m^$¹^.⁵^m^illioⁿ^to^$²^m^illioⁿ^.

Table A.7. Federal Estate Tax Rate Schedule for 2007 and 2008
Taxable EstateTentative Tax
(a)(b)(c)(d)
Bottom ofTop ofTax on bottomMarginal tax rate on bracket
bracketbracketof bracket
Tax on Plus: Rate of tax on amount over
OverBut Not Overamount bottom of bracket, in column (a),
in column (a)up to top of bracket, in column (b)
$ 0$ 10,000$0 +18% of such amount
10,00020,0001,800 +20% of excess over $10,000
20,00040,0003,800 +22% of excess over 20,000
40,00060,0008,200 +24% of excess over 40,000
60,00080,00013,000 +26% of excess over 60,000
80,000100,00018,200 +28% of excess over 80,000
100,000150,00023,800 +30% of excess over 100,000
150,000250,00038,800 +32% of excess over 150,000
250,000500,00070,800 +34% of excess over 250,000
500,000750,000155,800 +37% of excess over 500,000
750,0001,000,000248,300 +39% of excess over 750,000
1,000,0001,250,000345,800 +41% of excess over 1,000,000
1,250,0001,500,000448,300 +43% of excess over 1,250,000
1,500,000 — 555,800 +45% of excess over 1,500,000
Applicable Exclusion Amount will be $2 Million for 2007 and 2008
^No^te:^In^2007,^tax^rates^abov^e^45%^w^ill^be^{repealed. T}^h^{e tax}^{rate on}^tax^a^{ble v}^a^lu^es^ov^{er $2 m}^illion
^w^{ill b}^e^lo^w^e^r^e^d^f^r^o^m⁴⁶^%^to⁴⁵^%^{. T}^h^{e tax}^r^a^{te w}^a^{s alr}^ead^y⁴⁵^%^oⁿ^tax^a^b^l^e^estate^v^a^lu^{es f}^r^o^m^$¹^.⁵
^m^illioⁿ^to^$²^m^illioⁿ^,^uⁿ^d^er^p^r^io^r^law^.^T^h^u^s^{, th}^{e ta}^x^r^a^{te w}^{ill b}^e⁴⁵^%^oⁿ^tax^a^b^l^{e v}^a^lu^{es o}^v^er^$¹^.⁵
^m^illion.^T^h^{e applicable ex}^clu^s^ion^am^ouⁿ^t^w^ill^rem^aⁱⁿ^{at $2 m}^illion^.^T^h^{e law}^f^o^{r 2008 w}^{ill rem}^aⁱⁿ
^t^h^{e s}^a^m^e^as^f^o^{r 2007.}

Table A.8. Federal Estate Tax Rate Schedule for 2009
Taxable EstateTentative Tax
(a)(b)(c)(d)
Bottom ofTop ofTax on bottomMarginal tax rate on bracket
bracketbracketof bracket
Tax on Plus: Rate of tax on amount over
OverBut Not Overamount bottom of bracket, in column (a), up
in column (a)to top of bracket, in column (b)
$ 0$ 10,000$0 +18% of such amount
10,00020,0001,800 +20% of excess over $10,000
20,00040,0003,800 +22% of excess over 20,000
40,00060,0008,200 +24% of excess over 40,000
60,00080,00013,000 +26% of excess over 60,000
80,000100,00018,200 +28% of excess over 80,000
100,000150,00023,800 +30% of excess over 100,000
150,000250,00038,800 +32% of excess over 150,000
250,000500,00070,800 +34% of excess over 250,000
500,000750,000155,800 +37% of excess over 500,000
750,0001,000,000248,300 +39% of excess over 750,000
1,000,0001,250,000345,800 +41% of excess over 1,000,000
1,250,0001,500,000448,300 +43% of excess over 1,250,000
1,500,000 — 555,800 +45% of excess over 1,500,000
Applicable Exclusion Amount will be $3.5 Million for 2009
^No^te:^In^{2009, th}^{e applicable ex}^clu^s^ion^am^ouⁿ^t^w^ill^ris^e^f^r^om^{$2 m}^illion^{to $3.5 m}^illion^.^T^h^{ere w}^ill
^b^eⁿ^o^ad^d^itioⁿ^a^{l r}^e^d^u^ctioⁿⁱⁿ^th^{e m}^a^xⁱ^m^u^m^tax^r^a^te.