Understanding Inheritance Tax Responsibilities in the United States
This article explains the essentials of inheritance taxes in the U.S., highlighting state-specific rules, tax rates, beneficiary considerations, and filing requirements for foreign inheritances. It provides critical guidance for beneficiaries to navigate inheritance tax obligations effectively.
Inheritance taxes are levies imposed by state governments on assets inherited from deceased individuals. Unlike federal estate tax, which applies to the estate itself, inheritance tax is paid by beneficiaries receiving property or money. Only six states—New Jersey, Nebraska, Pennsylvania, Maryland, Kentucky, and Iowa—collect inheritance taxes. Beneficiaries often have exemptions if they are spouses, but tax rates vary from 1% to 20%, depending on the estate's value. Multiple beneficiaries usually share the estate, with taxes calculated based on the inheritance share and relationship to the deceased. Exemptions and deductions may be available, especially for close family members. Non-family members might face higher taxes. Foreign inheritances require additional IRS filings, like Form 3520, due by mid-April.
