Tax

Calculating Inheritance Tax

Calculating Inheritance Tax

November 30
00:00 -0001

Calculating Inheritance Tax


FORM 706 Estate Tax Return
FORM 706 Instructions
STATE INHERITANCE TAX RATE
Connecticut : (over $2mill:7.2~12.0%)(Gift Tax 12%)
Indiana : 20% 
  Forms : Tax Return 
Iowa : 15% 
  Forms : Tax Return 
Kentucky : 16% 
Maryland : 10% 

Nebraska : 18% 
  Forms : Estate Tax Return (’03~’07)
New Jersey : 16% 
  Forms : Tax Return Resident, Non-Resident 
Pennsylvania : 15% 
  Forms : Application Tax Return Resident, Non-Resident
Tennessee : 9.5% (Gift Tax 16%) 
  Forms : Tax Return Long form, Short form
States with ESTATE TAX : 
Connecticut, Delaware, D.C, Hawaii, 
Illinois, Maine, Massachusetts, 
Minnesota, New York, North Carolina, 
Ohio, Oregon, Rhode Island, Vermont, 
Washington.
States with INHERITANCE TAX :
Indiana, Iowa, Kentucky, Nebraska, 
Pennsylvania, Tennessee. 
States with GIFT TAX :
Connecticut, Tennessee
The inheritance tax, also referred to as the estate tax, is the taxation on assets received passed from a person who has died.  An inheritance tax is instituted in nations throughout the world, with both the United Kingdom and the United States requiring they be paid upon passage of property.  Different states in the United States even have their own inheritance taxes on top of Federal taxes.  These states include Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey, Oklahoma, Pennsylvania, and Tennessee. 

How Inheritance Taxes are calculated
In the United States, the estate tax is determined by looking at the “entire estate” that is left after a person’s death.  This inheritance tax is also a part of the overall gift tax regulations, which means that the inheritance tax cannot be avoided by gifting properly before death, as similar tax consequences will be required.  


1. The Gross Estate
The gross estate, which determines how much property and assets will be subject to tax, will often include much more than is devised through a will or probate.  In its simplest form, the gross estate consists of all property owned by the decedent at the time of his or her death.  The gross estate includes:
- Property or assets the decedent transferred up to 3 years prior to their death. 
- Annuities in the descendant’s name.
- The value of jointly owned property, with special rules for property co-owned by a spouse. 

2. Deductions Allowed from the Estate Tax
Once the value of the gross estate is determined, numerous deductions can be made before the tax rate is applied.  The following are some deductions that will be made:
- Estate administration expenses and funeral expenses. 
- Qualifying charitable donations.
- Property left to a surviving spouse.
- Property left in a qualified domestic trust. 


3. Exemption from Federal Inheritance Tax
Recently, the inheritance tax in the United States has gone through many changes.  In 2010, the Federal Estate Tax was not renewed, therefore no estates were taxed if the decedents died during the 210 tax year.  For 2011, Congress re-enacted the tax, however all estates will gross estate values of less than $5 Million are exempt from the estate tax.  Estates that are over the $5 Million mark are taxed at 35%, but only for the amount over $5 Million.  


4. State Specific Inheritance Taxes
While the federal inheritance tax does not affect most estates, as most estates will fall under the $5 Million exemption, some states do impose their own estate tax.  State estate taxes vary greatly, so it is important that you look into your specific state’s laws before making estate planning decisions.  Some states mirror the federal exemption, however many states with their own inheritance taxes will impose taxes even if no federal taxes will be imposed.  

Legal Issues of the Inheritance Tax

While the inheritance tax is set for the 2011 and 2012 years, it is uncertain how they will be dealt with after the law expires.  The estate tax laws have been change 19 times in 35 years, requiring estate planning professionals to change the estate planning of their clients very often.  

Share

About Author

admin

admin

Related Articles

Tax News

Woman Sentenced to Five Years Following Tax Fraud Scheme The plan seemed perfect to the three young Sacramento women: use internet tax software like TurboTax, steal Social Security numbers, and start filing fraudulent tax returns in the hopes of getting large refunds.
Proposed Pregnancy Tax Break Creates Controversy Proposed Pregnancy Tax Break Creates Controversy Michigan lawmakers have proposed a controversial new law that would give tax breaks to some pregnant women.
Statistics of Income Bulletin Released Statistics of Income Bulletin Released The Internal Revenue Service (IRS) released the 2012 issue of the Statistics of Income Bulletin last Wednesday.
More Tax Relief for Victims of Hurricane Sandy More Tax Relief for Victims of Hurricane Sandy The Internal Revenue Service (IRS) has announced more tax relief for businesses and individuals affected by Hurricane Sandy in Connecticut, New Jersey, and New York.
2013 Inflation Adjustments and Pension Plan Limitations 2013 Inflation Adjustments and Pension Plan Limitations On October 18, 2012, the Internal Revenue Service announced the increase of certain tax benefits because of inflation adjustments and 2013 pension plan limitations.
Farmers Affected by Drought Have Time to Replace Livestock Farmers Affected by Drought Have Time to Replace Livestock According to the Internal Revenue Service, farmers and ranchers affected by the huge drought in the United States have an extension to replace livestock and defer tax on gains made through forced sales.
Executive Director Pleads Guilty to Illegal Campaign Contributions Executive Director Pleads Guilty to Illegal Campaign Contributions On October 1, 2012, the US Attorney’s Office for the District of New Jersey announced that Thomas J.
Filing and Payment Extensions End October 15th Filing and Payment Extensions End October 15th On September 28, 2012, the Internal Revenue Service announced that taxpayers who received tax-filing extensions will have to file the forms by October 15.
Much Awaited Statistics of Income Bulletin Much Awaited Statistics of Income Bulletin On September 24, 2012, the Internal Revenue Service released the Summer 2012 issue of the Statistics of Income Bulletin.
Victims of Straight-Line Winds in WV Eligible for Tax Relief Victims of Straight-Line Winds in WV Eligible for Tax Relief On September 20, 2012, the Internal Revenue Service declared that victims of severe storms in parts of West Virginia that occurred on or around June 29, 2012, may receive tax relief.
Update Tax Relief for Hurricane Isaac Update Tax Relief for Hurricane Isaac The Internal Revenue Service has announced tax relief for victims of Hurricane Isaac on September 5, 2012, and the IRS has updated the areas for tax relief on September 17, 2012.
Obama Calls for Tax Credits for Unemployed Veterans Obama Calls for Tax Credits for Unemployed Veterans Calling on all members of Congress to put the country ahead of politics, President Obama called for action to help unemployed and injured Veterans land jobs during the difficult economy.
Payroll Tax Cut May Not Be Extended Payroll Tax Cut May Not Be Extended Republicans, who have already blocked much of President Obama's $447 billion jobs creation bill, may now be moving towards not extending the payroll tax cut as it expires at the end of the year.
France to Increase Tax, Cut Budget During Financial Difficulty France to Increase Tax, Cut Budget During Financial Difficulty With the European financial crisis creating havoc among Euro Zone member's economy, France has been forced to re-tool their budget in light of an unbalanced budget.

Guide To: Tax Lawyers

Guide to Finding Tax Lawyer Guide to Finding Tax Lawyer How do I find a Tax Lawyer?Tax lawyers specialize in helping clients who need guidance in navigating the complex tax codes of the United States and local state taxes.