Estate Tax
Tax on the transfer of assets from a deceased person.
The federal estate tax applies to estates exceeding the exemption amount ($13.61 million per individual in 2024). The tax rate is 40% on amounts above the exemption. Some states impose additional estate taxes with lower thresholds. Business succession planning is critical because the value of a business is included in the taxable estate.
Example
A business owner with a $16 million estate owes federal estate tax on approximately $2.39 million (the amount exceeding the exemption) at a 40% rate—roughly $956,000.
Why It Matters for Your Business
Without proper estate planning, a family business could face a tax bill large enough to force its sale, so advance planning with trusts and insurance is essential.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
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