People are often confused about the way that inheritances can be taxed. If you have heard the terms “estate tax” and “inheritance tax,” you may assume these are two different ways of describing the same thing. There are also those that think that the terms refer to the requirement to report inheritances as income when you file your regular tax returns. In reality, all of the above assumptions are mistaken, and we will provide clarity in this post. Income Taxes and Capital Gains … [Read more...] about Inheritance Tax vs. Estate Tax: Is There a Difference?
Many people are surprised to hear that taxation is usually not much of a problem when an estate is being distributed to the heirs. There are no income taxes on inheritances, and if you inherit appreciated assets, you get a step up in basis. This means that you would not have to pay capital gains tax on gains that accumulated during the life of the decedent. A tax that can take a heavy toll if you are exposed is the federal estate tax. It carries a whopping 40 percent maximum rate, but you … [Read more...] about Is There a Connecticut Estate Tax?
Where you die matters. While you’ll pay the same federal estate tax no matter where you die, 1/3 of the states have a separate estate or inheritance tax. The most populous state, California, is the latest state to consider adding a state estate tax. Read on to learn more. When and Where You Die Matters … [Read more...] about When and Where You Die Matters
There are taxes on asset transfers in the United States. There is an estate tax, and there is a gift tax. The gift tax is in place to prevent people from giving away their assets while they are living in an effort to avoid the estate tax. These two taxes are unified under the tax code. There is a $5.34 million unified lifetime exclusion or credit in 2014. This is the amount that you could transfer free of taxation. Because of this relatively large exclusion, most families will never pay the … [Read more...] about Will My Heirs Be Forced to Pay an Inheritance Tax?
It can sometimes seem as though you are taxed at every turn, and taxation potentially comes into play when you are planning your estate. We will look at the matter in this post. Inheritance Recipients If you are the recipient of an inheritance, do you have to pay income taxes on this windfall? This is certainly a good question. Generally speaking the answer is no, you do not have to report an inheritance on your annual income tax return. There is however a caveat with regard to the … [Read more...] about Do I Have to Pay Taxes When Someone Leaves Me Money?