Who is the inheritance coming from (parent, grandparent, cousin, uncle, etc.)? What is the amount? And what state do you and the deceased loved one live in? When thinking about the inheritance tax, there are three big considerations.
(Can we get an amen?) These days, only six states still have the tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. Once upon a time, all 50 states had an inheritance tax, but over the years more states have done away with it. 1 We’ll talk about estate taxes a little later. Don’t confuse the inheritance tax with the federal estate tax, which is tacked on estates worth more than $11.7 milllion. Whether you’ve received an inheritance, or you’re considering leaving an inheritance and wondering how taxes could affect it, we’ll walk you through how it works.Īn inheritance tax is a state tax you have to pay on property or money you receive from someone who has passed away. But to top it all off, you might have to pay an inheritance tax. Losing a loved one is tough, and an inheritance is little comfort when it comes to grief. You’d give it all up just to spend an hour chatting with her at her kitchen table. And when she died, she left you $10,000 and her collection of Precious Moments figurines. This state offers a 5 percent discount if paid in three months.Aunt Edna always said you were her favorite (though she said that to all of her nieces and nephews). Heirs have nine months to complete related inheritance tax forms. Pennsylvania was the first-ever states with inheritance tax levies. By the way, more states started doing away with levying either inheritance or estate taxes since 2005. Pennsylvaniaīeneficiaries pay 15 percent of inheritance value in this state. Heir tax forms must be filled out and submitted within eight months. In 2017, this state still offered estate value credits of up to $2 million. NJ phased out inheritance taxes around the same time Delaware discontinued its estate tax in early 2018. This state’s 16 percent rate calculates as the second highest inheritance tax rate. Heirs have 12 months to fill out and submit tax forms. Lineal heirs only pay one percent, and Nebraska places the highest levy on people not related to the deceased. This state’s 18 percent tax it requires heirs to pay makes it the highest tax bill of six states with inheritance tax laws. The state gives heirs 18 months to file inheritance tax forms and offers a 5 percent discount if page within half that time. However, non-related persons and other people connected to the family might have to pay taxes on inherited assets. As of 2017, lineal heirs (natural descendants such as mother, child, father or grandchild) descendants are exempt. Kentucky’s tax isn’t tied to federal tax requirements. Here, heirs pay up to 16 percent inheritance tax but no estate taxes.
8-16 percent depending on total property value according to 2017 data. The lowest estate levy starts against amounts of at least $40,000 and works its way up to more than $10 million. This state also is the only remaining inheritance tax states that has a tiered estate tax structure.
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