The inheritance tax is another name for an estate tax. The inheritance tax is is intended to be levied on the wealthiest citizens. The tax is applied on the monies, and estate value left to those who inherit following someone’s death. This is especially true if the estate has a high value.
But, this tax can affect people regardless of the amount of money that is involved in the inherited estate. With the increase of property values. The value of estates have also increased. Which means, that one who inherits a home or property may find they have to pay a taxes on the value of their inheritance.
The estate tax, or inheritance tax as it’s often called is highly controversial. Many citizens believe that the original owner of the estate had paid their appropriate tax before their death. And as such, it is believed that taxing the estate after death essentially is charging a double tax. Yet, the taxes levied on estates is still in the tax code.
How Much are Inheritance Taxes?
Inheritance taxes can cost from forty to fifty percent of value of the estate, if the value is assessed to be above a certain maximum amount. The tax rate is different in each state, so the rate depends on where you life.
An exception to this is that when a co-owner of an estate dies, the surviving owner(s) retain the property without it being considered an inheritance.
How to Reduce Inheritance Taxes
It is possible to reduce the amount of inheritance tax you may have to pay. Many wealthy individuals know and examine often the tax codes to see where loopholes might be. You too, can learn how to use the same loopholes to your own advantage.
Giving gifts to family members before death can decrease the value of the estate after death. So, gifting your son, daughter, spouse, or other loved ones portions of your estate while you are living can reduce their tax burden following your death. The annual gift tax exclusion is for the 2019 tax year is $15,000 per person.
While this type of gift giving prior to death isn’t always possible knowing and planning ahead can help to reduce the amount of inheritance taxes that your estate will owe after your death.