What Is Inheritance Tax? All You Must Know
The term “inheritance tax” has 2 commonly used meanings. Firstly, it could refer to the final tax on property passing from one person to another. It can also be referred to as Estate Tax, which the government imposes upon the death of an individual if that estate exceeds a predetermined value limit.
The government imposes some taxes for inheritance purposes. In this article, we’ll explain all aspects of such taxes so that you can better understand these concepts, and look for legal help from probate attorneys in Round Rock, TX.
Inheritance Tax Fees
What Is Inheritance Tax?
Some states levy an inheritance tax on people’s inherited assets. The magnitude of the inheritance, the decedent’s relationship to the beneficiary, and the state in which the decedent lived or owned property are all factors to determine the amount to be taxed.
There is no federal inheritance tax, and only 6 states continue to levy their own. Maryland is the only state that has both an estate and inheritance tax.
Paying For Inheritance Tax
The tax is normally calculated on a sliding scale over specified limits. Rates usually start in the single digits and grow to between 15 and 19 percent.
- Iowa: 5% to 15%
- Kentucky: 6% to 16%
- Maryland: 10%
- Nebraska: 1% to 18%
- New Jersey: 11% to 16%
- Pennsylvania: 4.5% to 15%
Inheritance tax is only levied if the deceased person lived in one of these 6 states. Even if you live in one of these 6 states, you will not have to pay any inheritance tax if the deceased lived in a state without inheritance tax.
What Is an Estate Tax and How Does It Work?
An estate tax is levied on estates whose worth exceeds a statutory exclusion limit. Only the portion of the income that exceeds the minimum threshold is taxed. These fees are based on the estate’s fair market value (FMV) rather than what the deceased paid for its assets originally.
Estates worth more than $11.4 million are subject to a federal estate tax. Taxes must be paid within 9 months of the date of death and can be as high as 40%, depending on the size of the estate. Congress has been highly active in this area, and the regulations controlling estate taxes are set to alter annually for the next few years. You can keep your estate’s tax liability low with diligent planning.
Does Texas Have An Inheritance Tax?
In Texas, there are no inheritance taxes. On September 1, 2015, the state abolished the inheritance tax. However, you’ll very certainly be required to file taxes on behalf of the deceased, including:
*Individual last federal and state income tax returns must be filed by the tax day following the individual’s death.
*The federal estate/trust income tax return must be filed by April 15 of the year after the individual’s death.
*Federal estate tax return: Due 9 months after the individual’s death, though if requested before the end of the 9-month term, an automatic 6-month extension is granted.
Get Professional Help From A Qualified Probate Lawyer
Although inheritance isn’t usually considered income, certain types of assets you receive may be subject to taxes. When you take distributions from an inherited retirement plan or sell inherited real estate or assets, you may have to pay taxes.
At Elissa Henry Law Firm, we have been helping people throughout Texas deal with probate cases. Our practice areas include personal injury, wills, estate planning, probate, and immigration. Our expertise and strong leadership skills provide us a distinct advantage and position us well to meet the legal demands of our clients.