How Do You Calculate Inheritance Taxes?


Quick Answer

People calculate inheritance taxes on the portion of the estate that they receive by subtracting the state's exemption and then multiplying the remainder by the state's applicable tax rate, as TurboTax instructs. Some states require the executor to file a single inheritance tax return for the entire estate, explains Nolo.

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Full Answer

In Iowa, the inheritance tax exemption is $25,000 as of 2015, and there is a maximum tax rate of 15 percent, according to About.com. Kentucky's exemption is only $999.99, and the maximum tax rate is 16 percent, and in Maryland, there is no exemption and a maximum tax rate of 10 percent. Nebraska's maximum tax rate is 18 percent combined with an exemption of up to $40,000, and for New Jersey residents, the maximum tax rate is 16 percent after an exemption of up to $25,000. Pennsylvania uses an exemption of $3,500 and a maximum tax rate of 15 percent. According to state statutes, Tennessee levies an inheritance tax, but it functions like an estate tax, and residents pay a maximum of 9.5 percent after a $5 million exemption. No other states charge inheritance tax.

Even if a state charges inheritance tax, the state often exempts spouses from paying an inheritance tax, as TurboTax explains. States may also exempt dependants or former dependants, such as adult children, from paying the maximum tax rate.

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