Inheritance Tax

I know that probably all of us are tired of hearing about taxes, but I decided to post about inheritance tax as it might be useful to know in case you inherit anything. Only a few states enforce to tax inheritance, so if you do end up inheriting anything from someone who lived in those states, your inheritance might be subjected to taxes.

  • Maryland
  • Nebraska
  • Kentucky
  • New Jersey
  • Pennsylvania
  • Iowa

How inheritance tax works

Once the executor of the estate has divided up the assets and distributed them to the beneficiaries, the inheritance tax comes into play. The tax amount is calculated separately for each individual beneficiary, and the beneficiary must pay the tax. For example, a state may charge a 5 percent tax on all inheritances larger than $2 million. Therefore, if your friend leaves you $5 million in his will, you only pay tax on $3 million, which is $150,000.

One Reply to “Inheritance Tax”

  1. Since my parents still have a house in New Jersey, this post caught my attention.

    After some research, I discovered that New Jersey fortunately got rid of the Estate Tax at the beginning of last year, but still has its Inheritance Tax. Then I did some Googling and found out that “transfers to surviving spouses are completely exempt from the inheritance tax in all six states that collect it” (https://www.forbes.com/sites/ashleaebeling/2016/10/07/new-jersey-repeals-estate-tax-not-inheritance-tax/#11ffa8195072)

    Therefore, I am completely of both of these tax laws.

    Thanks for putting this up David! Wouldn’t have discovered this if you hadn’t.

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