HomePersonal FinanceThese States Don't Collect Inheritance Taxes! Find Out What They Are

These States Don’t Collect Inheritance Taxes! Find Out What They Are

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

There’s normally no Inheritance Tax to pay if either:

  • the value of your estate is below the £325,000 threshold
  • you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club

Read more: Child Tax Credit 2021 Update – Families Could Get a ‘Surprise’ $8,000 Stimulus Payment After ‘Thanksgiving’ Cash Issued

The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.

In most cases, assets you receive as a gift or inheritance aren’t taxable income at the federal level. However, if the assets you inherit later produce income (perhaps they earn interest or dividends, or you collect rent), that income is probably taxable.

Only five states apply an inheritance tax: New Jersey, Nebraska, Iowa, Kentucky, and Pennsylvania.

Twelve have an estate tax:

Washington, Oregon, Minnesota, Illinois, New York, Maine, Vermont, Rhode Island, Massachusetts, Connecticut, Hawaii, and the District of Columbia.

Maryland collects both.

Read more: Iowa: New Income Withholding Tax Tables Issued for 2022

That leaves 32 states that do not collect death-related taxes:

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, and Wyoming.

If assets appreciate after you inherit them, you might need to pay capital gains tax if you sell the assets.

The capital gains tax rate is based on, among other things, the profit you make. For example, if your father leaves you a stock portfolio worth $200,000 on the day he died, and you sell it all for $350,000 two years later, you might owe capital gains tax on the $150,000 gain.

Read more: How a Dec. 15 Government Shutdown May Affect Your Child Tax Credit Payment?

  • Certain types of inheritances might also create taxable income. For example, if you inherit an IRA or 401(k), the distributions you take might be taxable.

  • States might have their own capital gains tax rules, so it’s a good idea to seek qualified advice.

Stay updated with more news here with us at the East County Gazette. 

Celine German Lagundi
Celine German Lagundihttps://theeastcountygazette.com/
Celine is an experienced news writer, artist, and advocate based in Cebu. She is passionate about pop culture and current affairs.
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