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The federal estate tax exemption has been raised to $3.5 million, effective January 1, 2009. The estate tax was scheduled to be repealed altogether in 2010 and then to come back in 2011 (going back to an exemption of just $1 million and a tax rate of 55%), but experts expect Congress to act this year to keep the estate tax at its current levels: a 45% tax on estates, with an exemption of $3.5 million.
In addition, effective January 1, 2009, you can give away more money without incurring federal gift tax. In any calendar year, you can make gifts of up to $13,000 each to any number of recipients without being subject to the federal gift tax. The old annual limit on these tax-exempt gifts was $12,000.
