Taxes On Inheritance

Everyone who inherits any property or estate of value wonders about the tax implications. There are three different types of taxes with relevance to inheritances: Inheritance, Estate, and Income taxes.

Inheritance taxes: As of 2015, 6 U.S. states impose taxes on inheritances. They are New Jersey, Pennsylvania, Maryland, Kentucky, Iowa and Nebraska. In each case, widows or widowers inheriting property are not subject to inheritance tax. In addition children and grandchildren of the deceased are exempted from inheritance tax in all but Pennsylvania and Nebraska.

This means that if the person who has passed did not live or own real estate in Iowa, Kentucky, Maryland, Nebraska, New Jersey or Pennsylvania, any inheritance from them will not be taxed with an inheritance tax, regardless of where the inheritor of the property resides.

Estate taxes: While federal estate taxes are applied in all 50 states and the District of Columbia, as of 2015 the exemption amount is $5,430,000. If the inheritance is not at least that value, absolutely no federal estates taxes will be owed. The exemption amount is based on the year of death of the deceased, and has been raised each year.

In terms of state estate taxes, as of 2015, fifteen states and the District of Columbia impose them. The states are Maine, Vermont, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Delaware, Maryland, Tennessee, Illinois, Minnesota, Oregon, Washington and Hawaii. As with federal estate taxes, the deceased must have lived or owned real estate in one of the jurisdictions that impose the tax, and the value of the inheritance must exceed the exemption threshold. The cut-off amount varies from the high of $5,430,000 in both Delaware and Hawaii, to the low of $675,000 in New Jersey.

Income taxes: In almost every case, in every state, inheritances are not regarded as income, so they are not subject to income taxes, neither of the federal or state variety.

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