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10 Death Tax Myths

There is a death tax

Although tax-reduction advocates frequently use the term "death tax," there is no state or federal tax that's officially called by this name. The term actually refers to a pair of taxes levied by the government: the estate tax and the inheritance, or gift, tax [source: IRS].

These taxes have been around in various forms since the era of Roman emperors. Taxes on the transfer of wealth, as gifts or inheritance, were often instituted to help nations pay for wars or other major unexpected events that threatened fiscal integrity. In many cases, these taxes were repealed after the war or event ended [source: Jacobson].

In the United States, estate taxes were first used to help finance wars in the late 1700s. The estate tax reappeared during other times of conflict into the 1800s. The tax became a formal, non-war-related tax later, when the federal government passed the Revenue Act of 1916 [source: Jacobson]. The taxation rates, exemptions and other details have changed drastically since then, but the taxes have never officially been called death taxes. Likewise, the Internal Revenue Service (IRS) doesn't charge taxpayers a fee simply for dying, as the name "death tax" might imply [source: IRS].

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