In the U.S., the policies regarding inheritance tax and inheritance tax waivers vary from state to state. The main important thing to consider regarding inheritance tax is the liability of an estate or property to pay inheritance tax when it will be passed to a successor. The estate in this context also includes life insurances of the deceased person. The inheritance tax depends on the gross value of the estate but there are number of deductions that can be considered to reduce the taxable amount of the estate.
The federal law provides several parameters for exemption on paying inheritance taxes. The spouse of the decease is exempted to pay inheritance tax of the properties that will be passed on while other inheritors, excluding the spouse, will have to pay the particular inheritance tax incurred by the estate. Several exemptions are also made under the federal law with regards to income and the type of property being taxed. Beginning 2009, the first $3.5 million of the value of an estate is exempted from paying inheritance tax. In the case of estate values that are beyond the said amount, only the succeeding amount will be subjected to tax. A rate of 45 percent will be taxed to the following amount of the estate involved. Under the law, family-owned farms can appeal for specific exemption regarding inheritance tax. In general, inheritance tax will be high if the value of the estate being taxed is also high.
Unfortunately, these taxing procedures are not in general. Inheritance taxing depends also on the policies that are given by the governing state. Some states usually deduct the value of the tax depending on the class the inheritor belongs; deductions are made if the inheritor belongs to class A while none are given for the other classes. An example of these states is Pennsylvania; there is a $3,500 deduction to the value being taxed to the family of the deceased so only the succeeding amount will be taxed. Other states also offer large family exemptions. In the case of Tennessee, estate values that are below $1,000,000 will be exempted from paying inheritance tax.
Filing inheritance tax requires a specific form for this tax. It is not included on other tax forms like the income tax because the sole essence of inheritance does not mean income. Normally, inheritance tax is higher than income tax that is why most people consider this tax as a burden. The site retirementliving.com offers information about states that still levy inheritance taxes, these are: New Jersey, Connecticut, Indiana, Iowa, Kansa, Kentucky, Nebraska, Maryland Oregon, Pennsylvania and Tennessee. |