Inheritance Tax Threshold

The concept of inheritance tax is simple, if any of your relative passes away and leaves you any of his estate, then you become eligible to be taxed under the inheritance tax jurisdiction. There is a specified tax threshold that is applicable to the person who has come under the spectrum of this tax. The threshold considers your closeness to the relative such as the first blood relatives are taxed the least, the cousins or other relatives are taxed a bit more and other relatives such as the second cousins or the friends are taxed the most. In some cases, the inheritance tax is a flat tax, that is the rate of the tax to be paid is the same throughout irrespective of the relation between the inheriting person and deceased person.

Inheritance Tax Threshold: 2011

It must be noted that the person who has passed away and has willed away estate or other assets to any other person, is known as the deceased person. On the other hand the person which is receiving the assets as a result is known as the beneficiary.

The reason that why the issue of inheritance threshold is so complicated is that it intertwines into three prominent legislation of the United States, these include, the inheritance tax imposed by the state, then the concept of estate tax which is imposed by the government and lastly the concept of gift tax also comes into the picture when the transfer of property was made prior to the person's death. In such a case, there are several cases where all the three taxes may come into the picture. The state inheritance is levied as per state laws, which of course differs from state to state and in some cases, that is in some states, it is also not levied. The second implication is of the Federal tax which is levied on the gross asset value or rather total of specified value. The third faction that comes into the picture with the concept of taxes on gifts. Hence if you are inheriting anything then there are three things about which you will need to worry.

• The Federal estate taxes on the inherited estate.
• The state taxes which would be levied as the inheritance tax.
• The jurisdiction of gift taxes that would be imposed under certain circumstances.

Tax Threshold in the USA

The following are some brief details regarding the inheritance tax, rates, deduction, exemptions and thresholds.

To ascertain the total estate tax payable on the inherited estate, an assessment is made, here a schedule which is disclosed by revenue authorities is used to tally up what is known as the 'gross estate'. This estate is then subject to the tax threshold of 2010 and 2011, according to which any inherited estate after the enforcement of the 2011 and 2010, goes above $5 million in valuation is taxed to 35%.

The next consideration is the inheritance tax which is done according to the schedule, deductions and brackets which are deemed by the state legislature. The states that impose the inheritance tax include, the Connecticut, Indiana, Iowa, Kansas, Kentucky, Maryland, Nebraska, New Jersey, Oregon, Pennsylvania and Tennessee. Here are some additional details:

• In the state of Iowa, all lineal descendants of the deceased, which include, surviving spouse, children, grandchildren, parents and grandparents, are exempt from tax. The other beneficiaries/recipients are taxed, based upon their relationship with the deceased.
• In Kentucky, beneficiaries are divided into 3 classes from A to C depending upon their relationship with the deceased. The Class A people are not taxed, while people from class C pay the maximum tax.
• In the state of Pennsylvania for that matter there are three brackets, where in 4.5% tax is imposed for lineal descendants, 12% is imposed for siblings and 15% for any other person.
• In some states children and the spouse are completely exempt from the tax.
• On the other hand, remaining states follow federal law, while some states choose not to impose this tax.

In several cases, the gift tax that goes above $1,000,000, is subject to a Federal tax. As the representative or as a survivor there is a chance that you might be liable to pay this tax debt as the tax is applicable for life long gifts.

The concept of inheritance tax, threshold and rate, is very complicated and hence it is recommended that you contact your attorney for proper legal advise and help. The IRS may also come into picture as the inherited property sometimes implicates into immediate income, forging a ground for income tax. Hence just be cautions.