# How Much It Is and How to Calculate It

Contents

## What Is the Property Tax Exemption?

The federal property tax exemption—the quantity beneath which your property is just not topic to taxes while you die. The quantity usually will increase every year as it’s normally adjusted every year for inflation. For tax 12 months 2022, the property tax exemption is \$12.06 million. For tax 12 months 2023, the property tax exemption is \$12.91 million.

### Key Takeaways

• The federal property tax exemption for 2022 is \$12.06 million, rising to \$12.92 million in 2023.
• The property tax exemption is adjusted yearly to replicate adjustments in inflation yearly.
• The present exemption was doubled underneath the Tax Cuts and Jobs Act (TCJA) and is about to run out in 2026.
• In 2020, lower than 0.1% of estates needed to file an property tax return on account of exceeding the exemption quantity.
• Federal property tax is carefully associated to the Federal reward tax, and it doesn’t exclude or exempt from the generation-skipping switch tax both.

## Understanding the Property Tax Exemption

For 2022, the non-public federal property tax exemption quantity is \$12.06 million. It should improve to \$12.92 million for 2023. Which means when somebody dies and the worth of their property is calculated, any quantity greater than \$12.06 million is topic to the federal property tax until in any other case excluded. A married couple has a mixed exemption for 2022 of \$24.12 million (\$25.84 million for 2023).

Given the dimensions of the property tax exemption, the variety of Individuals who die every year with an property topic to an property tax is small. For instance, slightly below 3.4 million Individuals handed away in 2020. Of those, solely 3,441 estates, or about 0.1%, needed to file a Kind 706, United States Property (and Technology-Skipping Switch) Tax Return. Of that quantity, simply 1,275, or simply underneath 0.04%, really paid an property tax. The entire collected that 12 months was \$9.3 billion.

Although the \$12.06 million property tax exemption eliminates the overwhelming majority of estates from paying an property tax, it doesn’t get rid of all of them. If you’re the executor of an property with a gross property worth above \$12.06 million—after including adjusted taxable items and subtracting the quantity higher than the exemption quantity—then that extra is topic to the property tax.

## Property Tax Charges

Many individuals assume that the property tax is 40% on any taxable quantity. That’s not true. For many of the federal property tax tiers, you’ll pay a base tax plus a marginal charge. Present federal property taxes max out at 40% for taxable quantities higher than \$1 million. The desk beneath exhibits how the tax would accumulate because the taxable quantity will increase.