No Taxing Inheritance monies or any inheritance properties
The estate tax offers a tax-free allowance up to a certain limit, which changes frequently. For example, you may get to keep the first $1 million of an estate without paying any taxes. After that threshold, the tax rate is generally high --- somewhere between 45 and 50 percent. Other states claim that if there is not a will, your next of kin does not get your inheritance. It happened to Prince’s sister.
Seven states -- Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania -- impose an inheritance tax, though the Indiana tax ends in 2022. The tax applies if you or the deceased are state residents, or if you inherit property in one of those states. In Iowa, tax kicks in if the total estate if worth $25,000; in Pennsylvania, any inheritance is taxable. All states offer exemptions for close relatives: children under age 21 and spouses pay no inheritance tax in Pennsylvania, for instance.
For additional information:
If the taxes are more than you want to deal with, you can always disclaim the inheritance. Disclaiming is a legal step that lets the property pass to whichever beneficiary is next in line: you never take ownership of the house or the money, so you have no tax obligation. Suppose you're a 25-year-old Pennsylvanian who inherits $25,000 from your father. You would pay tax on the money if you accepted it, but if you disclaim it and your 15-year-old brother inherits, he's exempt.
Will You Have to Pay Taxes on Your Inheritance?
For more information, please reference: https://www.thebalance.com/julie-garber-3504831"
Updated September 25, 2016
NOTE: Tax laws change frequently and the following information may not reflect recent changes in those laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
A common question that comes up when I speak with the beneficiary of an estate or trust is whether or not the beneficiary will have to pay any taxes on their inheritance. Before this question can be answered, the beneficiary needs to understand that the term "taxes" actually encompasses three different types of taxes:
-- inheritance taxes
-- estate taxes
-- income taxes
Whether or not your inheritance will be subject to inheritance taxes, estate taxes and/or income taxes will depend on many factors.