IRS Estate Tax Exemption Amount Goes Up for 2023

IRS Estate Tax Exemption

The IRS estate tax exemption will once more increase in 2023. Since the exemption is calculated based on the Consumer Price Index, impacted taxpayers shouldn’t assume that this will happen every year. The good news is that it still makes up a sizable amount of the opening chapter for virtually every high-income American.

2023 IRS Estate Tax Exemption

The federal estate tax is typically not applicable to an estate when the value of the estate is less than the exemption level. The exemption amount is greater than $12.92 million for the years 2019 through 2023 (and for married couples, the income beginning in 2022). The exemption for a couple is worth $25.84 million.

IRS Estate Tax Exemption Rate

After all, only a small percentage of Americans who pass away have a net worth of more than $12.92 million. However, not every estate with a net worth in the vicinity of that sum is hit with a tax bill that starts off at a really high rate. A 40% tax rate is applied to about half of the estate’s worth. The amount over $1 million that is subject to lower rates of tax ranges from 18% to 39%, as shown in the table below. On the first $1 million of the asset, this results in an overall tax of $345,800, which is only $54,200 less than the tax you would pay if the estate were taxed at a high rate. On the other hand, after you surpass the $1 million threshold, the remaining estate worth is likewise subject to a 40% tax rate.

RateTaxable Amount (Value of Estate Exceeding Exemption)
18%$0 to $10,000
20%$10,001 to $20,000
22%$20,001 to $40,000
24%$40,001 to $60,000
26%$60,001 to $80,000
28%$80,001 to $1,00,000
30%$1,00,001 to $1,50,000
32%$1,50,001 to $2,50,000
34%$2,50,001 to $5,00,000
36%$5,00,001 to $7,50,000
38%$7,50,001 to $1 Million
40%Over $1 Million

Historical IRS Estate Tax Exemption Amounts

IRS Estate Tax Exemption

The estate tax exemption has only increased over time since the basic estate tax was changed in 1976 (see chart below). The rise is typically minimal, such as when making a small adjustment for inflation. The exemption threshold has, however, occasionally risen. For instance, it increased from $675,000 in 2002 to $1,000,000 in 2011, from $1,000,000 to $5,000,000 in 2011, and from $5.49 million to $11.18 million in 2018.

PeriodExemption Amount
1977 (Quarters 1 and 2)$30,000
1977 (Quarters 3 and 4)$120,667
1987 through 1997$600,000
2000 and 2001$675,000
2002 through 2010$1,000,000

State Estate Taxes

Nonetheless, just because there is no federal estate tax does not imply you are completely exempt from paying any state estate taxes. There are estate taxes in eleven states and the District of Columbia, and the state exemption levels are sometimes substantially smaller than the federal estate tax exemption. For instance, in Massachusetts and Oregon, the threshold for a reduced-support exemption is merely $1 million.

Six other states, in addition to Maryland, have inheritance taxes, which are often covered by your own family members. You might leave your children and grandchildren with less money in their pockets than you had intended for since your estate isn’t worth millions of dollars.

If you think you may benefit from the expected increase in the lifetime IRS estate tax exemption amount, please contact us or schedule a consultation today.

2023 IRA and Pension Plan Limitations

2023 IRA and pension plan limitations

The 2023 IRA and pension plan limitations have been announced.  Below are some of the more common amounts for 2023:

  • The defined benefit plan limitation is $265,000 (up from $245,000 for 2022).
  • The defined contribution plan maximum increases to $66,000 (up from $61,000).
  • The annual compensation limit for the calculation of most employer contributions is $330,000 (up from $305,000).
  • The Retirement Savers Credit is completely phased out at MFJ = $73,000 (up from $68,000), HH = $54,750 (up from $51,000), and all others = $36,500 (up from $34,000).
  • A year of service for SEP coverage remains at $750.
  • The maximum elective deferral for §401(k), §403(b), §457, and SARSEPs is $22,500 (up from $20,500 for 2021).  The catchup contribution limit for those aged 50 or older as of the end of the year is $7,500 (up from $6,500).
  • The maximum elective deferral to SIMPLE plans is $15,500 (up from $14,000).  The catch-up maximum is $3,500 (up from $3,000).
  • The maximum contribution to IRAs is $6,500 (up from $6,000).  The catch-up for IRAs is not subject to annual indexing and remains at $1,000.
  • The modified AGI phase-out ranges are $73,000-$83,000 (up from $68,000-$78,000); MFJ = $116,000-$136,000 (up from $109,000-$129,000); and MFJ when the taxpayer is not covered but the spouse is = $218,000-$228,000 (up from $204,000-$214,000).
  • Roth IRA AGI phase-out limits increase to $138,000-$153,000 (up from $129,000-$144,000).  For MFJ these amounts are $218,000-$228,000 (up from $204,000-$214,000).
  • The definition of high compensation for purposes of section 414(q)(1)(B) is $150,000 (up from 135,000).

The IRS Notice also has other pension-related indexed amounts such as key employee, top-heavy, and “control employee” limits.

A copy of Notice 2022-55 can be found at by clicking on IRS-drop and then clicking on Notice 2022-55.

This text has been shared courtesy of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065, fax 920-496-9111, We ask that no reproduction of this article take place without the express written consent of Ashwaubenon Tax Professionals, 2140 Holmgren Way #1040, Green Bay, WI 54304, USA.  We do not sell, give, or in any way share email addresses with anyone.  If you would like to be removed from our email list, send us an email to that effect or use the word UNSUBSCRIBE in the SUBJECT line.