What Is The Difference Between Income Tax & Estate Tax?

Most people are all too familiar with the myriad of taxes you may encounter during your life. From sales tax, to income tax, and ultimately estate tax, understanding the differences can help you strategically plan for your future. Income tax is a revenue source for different levels of government. This tax refers to a percentage of income generated by individuals and businesses that is paid to the government to support public services, pay government obligations, and other things. Income tax is generally assessed throughout an individual’s lifetime. In the United States we utilize a progressive rate structure which applies the lowest tax rate on the first level of an individual’s taxable income, then a higher rate on the next level of taxable income, until all of the taxable income has been accounted for. Estate tax functions slightly differently than income tax. Estate tax, which some refer to as “death tax,” is a tax on the value of an individual’s estate at the time of their death. This tax is levied on the estate prior to making any distributions to heirs or beneficiaries. The goal of the estate tax is to limit the transfer of untaxed wealth from generation to generation, as well as generating revenue for the federal government. Some states also have their own versions of estate taxes, but California currently does not. While estate taxation may seem daunting, only a very small percentage of people are ever subjected to the estate tax. Due to the high estate tax exemption amount, currently almost $24 million for a married couple and over $11 million for an individual, anyone whose estate does not surpass the exemption will not owe estate tax. Even if you are an individual whose estate will likely surpass the exemption amount, you can utilize the full exemption to reduce your estate tax liability significantly. This exemption is also subject to change in the coming years. Again, always consult a tax professional or CPA when considering the implications estate and income taxation might have in your life. The estate planning attorneys at Weiner Law are available to discuss strategic planning with your estate tax goals in mind. Call us at (858) 333-8844 to schedule a free, no-obligation evaluation. You can also visit our website to learn more about the evaluation process. Weiner Law 12707 High Bluff Drive Ste. 125 San Diego, CA 92130 (858) 333-8844 https://weinerlegacylaw.com/