Federal Estate Tax, Exclusion Amount

Each person is given a credit that may be applied to the amount of federal estate tax owed by that person at death.  Rather than discuss the credit amount, the value of the taxable estate that passes free of tax as a result of the credit is most often discussed. This value is referred to as the applicable exclusion amount.  Under EGTRRA, the applicable exclusion amount varies for different years as the Federal estate tax is phased out through 2010.

For decedents dying in each particular year, these exclusion amounts are:
2008 : $2,000,000
2009 : $3,500,000
2010 : Unlimited Exclusion / No Federal estate tax
2011 : $1,000,000

For instance, someone dying in 2008 with a taxable estate of $3,000,000 will owe federal estate tax on $1,000,000: the amount that remains after subtracting the applicable exclusion amount from the taxable estate.

The applicable exclusion amount is also personal, meaning that it cannot be shared with any other person. If a decedent's estate uses less than the entire applicable exclusion amount, it is forfeited.

See: Federal Estate Tax, Generally; Federal Estate Tax, Return in 2011