When Is Inheritance Tax Due?
Inheritance tax, also known as the death tax or estate tax must be paid to both the federal and state governments. The federal government requires that the taxes are paid within the tax year of the person’s death. State laws vary from state to state, but on average you have about 9 months from the time of death to make the appropriate payments on an estate. The government has specific tax forms that must be prepared for an estate and these forms must be prepared even if you believe that no estate tax will be due. It is advisable that you prepare and pay your estate taxes to the state first because the government allows a credit on their tax form for these taxes, providing you a way to reduce your tax burden.
What Is Included In Federal Inheritance Tax?
When you prepare your federal inheritance tax you will be required to report the value of the gross estate. The gross estate is considered to be the value of any and all properties the deceased owned or had an interest in at the time of death, life insurance and annuity proceeds that will be paid to your estate. The gross estate can also include any property that was sold or transferred in the previous three years. Once this total is calculated you will be allowed certain deductions to create a Net amount. Deductions will include and charitable deduction left by your estate, marital deductions, funeral expenses, debts and state taxes that have already been paid as an estate tax.
Does The Inheritance Tax Rate Ever Change?
The tax rate at both the federal and state level change each year; you will be taxed at the rate in which the death occurred. If you are unsure what the tax rate is in your area a quick check of the government or state revenue department website will provide you all the tax information for the current year.