So anything under that you wouldn’t pay an inheritance tax. To stick with New Jersey as an example, remember that the tax exemption amount for children-in-law is $25,000. Most of them use a progressive scale, which basically means the larger the inheritance, the higher the tax rate. There isn’t a one-tax-rate-fits-all approach within the six states.
Kentucky’s rates, for example, can be as low as 4% and as high as 16%, while the rate in New Jersey can be anywhere from 11% all the way up to 16%. Use one that’s on your side-Ramsey SmartTax.
#INHERITANCE TAX NY SOFTWARE#
The more distantly related you are and the higher the inheritance amount, the higher the tax rate goes up.ĭon’t settle for tax software with hidden fees or agendas. Tax rates and laws vary depending on the state, and rates are generally based on how closely related the person inheriting the assets is to the deceased. 5Įach state is different and taxes can change at the drop of a hat, so it’s a good idea to check tax laws in your state, or better yet, talk to a tax pro! You would pay an inheritance tax of 11% on $25,000 ($50,000 - $25,000) when it passes to you.
On the other hand, let’s say your father-in-law lived in New Jersey, and he left you $50,000.
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Uncle Sam doesn’t have an inheritance tax and inheritances are not considered taxable income in most cases-so you won't have to report your inheritance on your state or federal income tax return.įor example, if your father-in-law from Tennessee, a no-inheritance-tax state, leaves you $50,000, and you live in, say, New Jersey- a state with an inheritance tax exemption threshold of $25,000 for children-in-law -that wouldn’t be considered income, and you would be free to enjoy the inheritance without worrying about taxes.
On the other hand, if your loved one lived in any of the other 44 states without inheritance taxes, you can, in most cases, collect your inheritance tax-free-even if you live in one of the six states with the tax. 3Ĭousins, nieces and nephews and other extended family members often have to pay the inheritance tax. 2 In Nebraska, only spouses are fully exempt Pennsylvania exempts spouses and minor children. We say might because spouses, parents and children are exempt from paying inheritance taxes in Iowa, Kentucky, Maryland and New Jersey. Let’s just get the not-so-good news out of the way. If your loved one lived in one of the six states mentioned above, you might be on the hook for the inheritance tax. 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. Aunt Edna always said you were her favorite (though she said that to all of her nieces and nephews).
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