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State Variations of Estate Tax to be Aware of

State Variations of Estate Tax to be Aware of

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State Variations of Estate Tax to be Aware of
State taxes vary, based on the rules and regulations as set out by each tax jurisdiction. States taxes are governed by each state, with congress having the final determination, should the taxes be challenged by a taxpayer. Each state has the ability to impose inheritance taxes on taxpayers within that state. However, they are not required to do so. 
Some states impose and estate tax, while others impose an inheritance tax. There are several states that impose both the estate tax and inheritances taxes. For example, New Jersey and Maryland impose both a tax on the estate and inheritance taxes. Some states impose neither tax.
State taxes, such as the estate tax, can often be reduced through the utilization of certain deductions. For example, estate taxes can be reduces by lowering the gross estate value, after certain items have been paid. The benefactors funeral, and mortgages and debts, are all paid before the gross estate value is determined. 
Therefore, the tax burden on the estate is lowered by those deductions. State taxes on inheritance, are allowed differing deductions, exemptions and credits. For example, children can inherit up to one million dollars in their lifetime, tax free form either parent. Generally, spouses can also inherit tax free, depending on their state of residence.
There are currently seven states that collect the inheritance tax, on the state tax level. Each state allows for differing deductions, credits and exemptions. In each state, beneficiaries are required to pay the tax in a timely manner. 
In some cases, the inheritance tax can not be paid as fast as required, because the inherited assets may not be liquid assets, which means that beneficiaries may have to sell assets to pay the tax. State taxes that can not be paid by the deadline, generally a few months after the benefactor has passed away, require the beneficiary pay late fees and interest on that tax amount.
All state taxes, like inheritance taxes, must comply with all local, state and federal tax laws. For example, a state tax can not be imposed if Congress, or the Federal Courts, have determined that the tax is unconstitutional. 
Although the inheritance tax has been challenged in court many times, it is been upheld as constitutional in each case.  However, many states have allowed their inheritance tax statues to expire and many may not decide to renew those taxes.

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