Inheritance tax, a state-level levy imposed on the transfer of property or assets from a deceased individual to their beneficiaries, is distinct from the federal estate tax. While the federal government does not impose an inheritance tax, six states currently maintain this form of taxation: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Understanding which states impose inheritance tax is crucial for individuals inheriting property or assets from deceased individuals residing in these jurisdictions.
States with Inheritance Tax
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Iowa: Iowa is phasing out its inheritance tax, which was repealed in 2021. However, for deaths occurring between 2021 and 2024, some inheritors may still be subject to a reduced inheritance tax.
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Kentucky: Kentucky imposes an inheritance tax on inheritances exceeding specific exemption amounts, which vary based on the relationship between the deceased and the beneficiary.
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Maryland: Maryland is the only state that imposes both an estate tax and an inheritance tax. The inheritance tax rates range from 0% to 10%, depending on the beneficiary’s relationship to the deceased.
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Nebraska: Nebraska’s inheritance tax rates vary based on the beneficiary’s relationship to the deceased and the value of the inheritance.
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New Jersey: New Jersey imposes an inheritance tax on inheritances exceeding specific exemption amounts, which vary based on the relationship between the deceased and the beneficiary.
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Pennsylvania: Pennsylvania’s inheritance tax rates range from 0% to 15%, depending on the beneficiary’s relationship to the deceased.
Exemptions and Rates
Inheritance tax exemptions and rates vary significantly among the six states that impose this tax. It is important to consult the specific state’s tax laws to determine the applicable exemptions and rates for your situation.
Filing Requirements
If inheritance tax is due, the executor of the deceased individual’s estate is typically responsible for filing the inheritance tax return. The return must be filed within a specified timeframe, which varies by state.
Understanding which states impose inheritance tax is essential for individuals inheriting property or assets from deceased individuals residing in these jurisdictions. By being aware of the applicable tax laws, individuals can ensure that they meet their tax obligations and avoid any potential penalties or interest charges.
States With Inheritance or Estate Tax
FAQ
How much can you inherit without paying federal taxes?
What is difference between inheritance tax and estate tax?
What states have inheritance tax calculator?
Do you have to report inheritance money to IRS?
Which state has the lowest inheritance tax?
Massachusetts and Oregon have the lowest exemption levels at $1 million, and Connecticut has the highest exemption level at $7.1 million. Of the six states with inheritance taxes, Nebraska has the highest top rate at 18 percent. Maryland imposes the lowest top rate at 10 percent.
How many states have estate taxes & inheritance taxes?
Twelve states and the District of Columbia have estate taxes and six states have inheritance taxes. Maryland is the only state that has an estate tax and an inheritance tax. Here’s how to find out if estate and inheritance taxes will impact your heirs and steps you can take to minimize taxes for beneficiaries. 10 Tax Breaks for People Over 50.
Which state has the highest inheritance tax?
Washington has the highest estate tax at 20%, which is applied to the portion of an estate’s value greater than $11,193,000. Inheritance tax rates depend on the beneficiary’s relation to the deceased, and, in each state, certain types of relationships are exempt from inheritance tax. Estate vs. inheritance taxes: What’s the difference?
Which states charge inheritance tax in 2021?
Inheritance tax rates differ by the state. As of 2021, the six states that charge an inheritance tax are: Pennsylvania (0-15 percent). Maryland is the only state to charge both an inheritance and an estate tax, meaning the total value of a deceased individual’s estate could be hit twice with levies.