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Inheritance tax questions are becoming more popular as more and more people are realizing the importance of this little talked about tax. Rules continue to change as to who this tax affects, so knowing how this tax works is beneficial to everyone.
1. What Is an Inheritance Tax?
To start out with, many people do not even realize that there is such a thing as an inheritance tax. They are then surprised that they have to pay on assets of the deceased. For the most part, an inheritance tax is a tax on assets owned, or controled, by the deceased at the time of their death. It also is applied to anything they may have gifted within a year of their death. This tax does not apply, however, to any life insurance.
2. What Are the Tax Rates for Inheritance Tax?
This will vary according to your state. It is also dependant on the relationship between the deceased and the family members inheriting the assets. Most tax rates are:
In the event that there is a property that is jointly owned by the deceased and another family member, or other individual, the rate of tax is based on the length of time the property was owned jointly. If the property was owned jointly for more than one year, then 50% of the value is taxed. However, if the property was owned jointly less than a year prior to death the tax is 100% of the value.
4. How Long Do I Have to Pay the Inheritance Tax?
As a general rule, most inheritance taxes must be filed within 9 months from the date of death. Some states vary on this, but it is true for most of the them. If you have difficulty with the tax, you can also file for a 6 month extension. During this time, though, there will be interests charged to the unpaid portion of the tax. You can also have a credit applied if you pay within a few months.
5. I Received an Inheritance. How Can I Avoid Any Gains Tax?
For the most part, if you have received an inheritance in the form of cash, then the taxes were probably already paid on it by the estate. You should not have to worry about any other taxes being levied on it and are free to use it for how you want.
Inheritance tax can be a little confusing at times. However, when you take the steps to learn, and ask inheritance tax questions, you can easily find out what is taxable and what isn't. In most cases, everything other than life insurance can be taxable as an inheritance tax. There are some ways to get past some of the taxes with some thought before hand.
1. What Is an Inheritance Tax?
To start out with, many people do not even realize that there is such a thing as an inheritance tax. They are then surprised that they have to pay on assets of the deceased. For the most part, an inheritance tax is a tax on assets owned, or controled, by the deceased at the time of their death. It also is applied to anything they may have gifted within a year of their death. This tax does not apply, however, to any life insurance.
2. What Are the Tax Rates for Inheritance Tax?
This will vary according to your state. It is also dependant on the relationship between the deceased and the family members inheriting the assets. Most tax rates are:
- Spouse: 0%
- Charity; 0%
- Child: 4.5%
- Parent: 4.5%
- Sibling: 12%
- All others: 15%
In the event that there is a property that is jointly owned by the deceased and another family member, or other individual, the rate of tax is based on the length of time the property was owned jointly. If the property was owned jointly for more than one year, then 50% of the value is taxed. However, if the property was owned jointly less than a year prior to death the tax is 100% of the value.
4. How Long Do I Have to Pay the Inheritance Tax?
As a general rule, most inheritance taxes must be filed within 9 months from the date of death. Some states vary on this, but it is true for most of the them. If you have difficulty with the tax, you can also file for a 6 month extension. During this time, though, there will be interests charged to the unpaid portion of the tax. You can also have a credit applied if you pay within a few months.
5. I Received an Inheritance. How Can I Avoid Any Gains Tax?
For the most part, if you have received an inheritance in the form of cash, then the taxes were probably already paid on it by the estate. You should not have to worry about any other taxes being levied on it and are free to use it for how you want.
Inheritance tax can be a little confusing at times. However, when you take the steps to learn, and ask inheritance tax questions, you can easily find out what is taxable and what isn't. In most cases, everything other than life insurance can be taxable as an inheritance tax. There are some ways to get past some of the taxes with some thought before hand.
