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Inheritance income tax is not treated as income. Incomes are earnings, wages, salaries and profits. The amount of income taxes paid is predicated on an individual’s financial situation. Deductions and credits are also based on the individual’s overall financial picture.
What is an Inheritance Tax?
An inheritance is the amount of proceeds received by an heir from a deceased person’s estate. In the United States, inheritance taxes are commonly referred to as an estate tax and pejoratively as a “death tax.” The amount of inheritance tax paid is based on the amount received in inheritance, reduced by any credits or amounts that are excludable in accordance to the Internal Revenue Code. The maximum tax rate on an inheritance is 55 percent.
Tax Rates
In the year 2010, the estate tax is eliminated which means the tax rate will be assessed as 0 percent. However, in 2011, the estate tax rate is expected to return to a 50 to 55% tax rate. The current tax laws are written so that estate taxes vary:
- In 2009, maximum estate tax credit of $3.5 million, taxed 45%
- In 2010, taxes repealed, 0 taxes
- In 2011, maximum estate tax credit of $1 million, taxed 50%-55%
