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There is no federal inheritance property tax in the United States. The tax on property received from a deceased person’s estate is known as an estate tax. The maximum tax rate on property received from a deceased person’s estate is 55 percent. It is important to understand this since the term inheritance tax and estate tax are sometimes used interchangeably to describe federal estate tax laws.
States with Inheritance Taxes
Some states however do have an inheritance tax on property received from a deceased person’s estate. The factors that go into determining the amount of tax payable depends first and foremost on the state where the tax is assessed. The following states have a form of taxes on inheritances:
- Iowa
- Indiana
- Kentucky
- Maryland
- Nebraska
- New Jersey
- Oregon
- Pennsylvania
- Tennessee
The tax rate is based on the amount received in inheritance assets and by whom. Spouses and children are taxed at rates that differ from other family members or an unrelated individual.
Definition of Property
It should understood that the term property for the purpose of estate taxes means any asset such as life insurance proceeds, cash, art work, jewelry, real estate (including a primary or secondary residence), collectibles and other asset with a discernible market value. When computing a value on the estate for inheritance tax purposes, each property is valued based on what it can be sold for or its fair market value.
