#AskTheTaxWhiz: How do I calculate how much estate tax to pay?

My parents passed away last year, so now I have to pay estate tax. How do I calculate how much I have to pay?

Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, the estate tax is only 6% of the net estate (the estate tax previously ranged from 5% to 20% of the net estate).

To arrive at the net estate, taxpayers simply have to subtract all the allowable deductions from the gross estate (the value of all the properties of the decedent or the person who died).

One of these deductions is the standard deduction, which is an automatic P5-million deduction from the gross estate. So, if the value of the gross estate is less than that amount, then the heir won’t have to pay any estate tax (but they still have to file).

Another of the larger deductions is the family home. Under the TRAIN law, up to P10 million can be deducted from the value of the family’s house. Note that the full P10 million is not automatically deducted. For instance, if the family home only has a value of P9 million, then only P9 million will be deducted – not the entire P10 million allowable.

A few more reminders: You shouldn’t confuse the estate tax return (BIR Form No. 1801) from the estate tax amnesty return (BIR Form No. 2118-EA) as those are two entirely different things. Similarly, you should not confuse their deadlines either. You can file estate tax amnesty returns anytime within two years from its implementation, but the estate tax returns have to be filed within a year from the death of the decedent. (READ: #AskTheTaxWhiz: All about estate tax amnesty)

I heard that you can already withdraw from the decedent’s bank accounts in order to pay estate tax. Do I have to file anything more for this?

Yes, you can do that, but your withdrawal will be subject to a 6% final withholding tax. Since it’s a final tax, you won’t have to do much. Most of the processing will be done by the bank. According to Revenue Regulations No. 8-2019, the bank will have to file either BIR Form No. 0620 (if the withdrawal was done in the first two months of a quarter) or BIR Form No. 1621 (if the withdrawal was done in the last month of the quarter).

What you need to look for is BIR Form No. 2306, which will be your proof that the bank actually withheld taxes from you.

Also, if the deposit account was included in the gross estate, the 6% final withholding tax on withdrawals can be considered as tax credit in the estate tax return.

The estate tax is the last tax a taxpayer has to pay (although it’s the heirs that have to process it). From birth to death, taxpayers have to pay a tax in some form or another. Iwas Buwis-it: What To Do When Tax Attacks gives taxpayers an overview of their day-to-day experiences and the taxes they pay as they go through these.

For more information, visit www.acg.ph. If you have questions, you can also contact us at consult@acg.ph or (02) 622-7720. – Rappler.com

Mon Abrea, popularly known as the Philippine Tax Whiz, is one of the 2017 Outstanding Persons of the World, a Move Awards 2016 Digital Mover, one of the 2015 The Outstanding Young Men of the Philippines (TOYM), an Asia CEO Young Leader of the Year, and founding president of the Asian Consulting Group (ACG) as well as the Center for Strategic Reforms of the Philippines (CSR Philippines). Assisting him in his column is JM Miñano, communications associate of ACG. He graduated with a bachelor’s degree in Communication Arts from the University of the Philippines Los Baños.

For inquiries, you may email consult@acg.ph or visit www.acg.ph for tax-related concerns.