Inheritance Income Tax

Inheritance tax is also known as death tax and estate tax. People have different ideas on this tax and their opinion is based on moral and legal aspects. Those who are against Inheritance tax say that enforcing a tax on people who have just lost one of their loved ones cannot be justified. Those who are supportive argue, the wealth inherited should be taxed as they are typically exchanged among the rich.

Though inheritance tax is called estate tax they are not identically comparable. The difference comes when deciding whether the individual who is entitled to the inheritance should pay the tax or the estate. To where the tax should be paid by the inherited party also makes a difference. Usually, in the USA, state levies inheritance tax. However, this method has been changed by many states now by repealing the inheritance taxes laws. In the USA, the Economic Growth and Tax Relief Reconciliation Act set in 2001 phased out estate tax. It will be repealed by 2010. It is to come into effect again by 2011. US congress is still debating on the matter.

The Inheritance tax is levied on the wealth a person received from the decedent's estate when he or she died. The estate involved the entire wealth and its interest the decedent held at the time of death. The beneficiaries of the inheritance should pay the taxes on what they owned but they can be entitled to reduce the tax as well.

On the other hand, the type of the inherited property and the relationship of the beneficiary to the decedent can differ the tax. When a man dies he can give his wealth equally or differently to his four children. The four children who benefited from this inheritance must pay taxes in accordance to each of the assets' value they received. The dead man's brother also received some inheritance along with the four children. He might have to pay higher taxes than the four children because he is not a linear descendant like the sons, daughters or parents of the dead person. The core essence is that non-linear relations have to pay higher taxes than the linear ones on their inheritance.

In keeping with this system, if a friend receives an inheritance, he or she has to pay very much higher than the close relatives who got the same value. On the other hand, estate tax is calculated on the entire value of the assets of the deceased and the tax should be paid by the administrator or the controller of the estate empowered by the deceased person but not the ones who are benefitted with an inheritance.