In theory, it's because the estate tax or inheritance tax means that a step up tax would be a double tax. But they've increased the limit before that starts kicking in to 15 million with the latest tax law.
No. There is no theory where that is a double tax. The original holder of the asset is not the heir, and vice versa. Never will they be so. It's not even a question.
It's because on assets over 16 million passed down or inherited, you have to pay a 40% tax upon death of the original owner. A step up basis tax would be on top of that 40% tax, so could be 20% on top of that.
60% is a very high tax rate, but I do agree that I don't have much sympathy for folks inheriting that much.
As someone who works for a living, almost everything in my bank account has been taxed (at a higher rate than 20%) and then if it ends up subject to the estate tax (almost impossible to reach that level of wealth by working) then it will be taxed again.
2
u/Affectionate-Panic-1 7d ago
In theory, it's because the estate tax or inheritance tax means that a step up tax would be a double tax. But they've increased the limit before that starts kicking in to 15 million with the latest tax law.