What Is Inheritance Tax ?  

Inheritance tax, estate tax and death duty are the names given to various taxes which arise on the death of an individual.

It is a tax on the estate, or total value of the property and money of a person who has died. The total value of the property is first established to determine the quantum of inheritance tax.

Inheritance tax is not levied if the beneficiary is a spouse. In some states the same applies with children and immediate relatives. There is a clear distinction between an inheritance tax and estate tax. State governments benefit from collection of inheritance tax.

Basis of determining Inheritance Tax: The first step to find out if an inheritance tax is due is to calculate the entire estate’s market value. Cash, bank accounts, real state insurance, stocks and bonds and the like are included. The total fair market value of all these items is called Gross Estate.

Deductions on the gross estate have to next be calculated. These take the form of paying off mortgage balance, or estate administration fees or payments made to an attorney or any outstanding dues for purchases which form part of the estate.

What remains after deductions is the net value of the property. To know whether inheritance tax is due, the net value of the property must be subtracted from the inheritance tax credits. If the net estate is larger, then taxes which are due can be determined.

In certain states like New Jersey, Nebraska, Tennessee, Pennsylvania, South Carolina, New Mexico and South Dakota, estate tax is imposed on the beneficiaries.

In Washington, Wisconsin, Virginia, Missouri, West Virginia and Wyoming, the inheritance tax is the same as estate tax.

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What Is Inheritance Tax

What-States-Have-Inheritance-Tax      In some states in the US, inheritance tax is the tax imposed on the beneficiary of an estate. The tax payable is assessed only on that portion of the estate which the beneficiary inherits. There is a subtle difference between inheritance and estate tax. Estate tax refers to a levy on the entire estate, payable before distribution of assets. More..




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