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
In most cases, an inheritance is not included on the recipient's federal tax filing, according to the Internal Revenue Service. Some circumstances, such as when inherited property produces taxable income or when the inheritance is the income from property, require federal taxation.
As of 2015, the federal inheritance, or estate, tax rate is 40 percent, according to Bankrate. The first $5.43 million of an estate is exempt and not taxed by the IRS.
The federal government levies no inheritance tax, reports Bankrate. Federal estate tax is levied on gross estates worth more than $5.43 million as of 2015, and the complex returns should be handled by both attorneys and Certified Public Accountants or Enrolled Agents, according to the IRS.
The general rule regarding inheritance is that the beneficiary does not pay any federal income tax on the money he inherits as of 2015, according to Intuit. However, the federal government may tax the estate of the deceased if the value exceeds the Internal Revenue Service limits.
Inheritance tax is levied by state governments, according to TurboTax. Inheritance tax is different from estate tax, which is levied by the federal government. As of 2015, only New Jersey, Maryland, Nebraska, Iowa, Kentucky and Pennsylvania have an inheritance tax, reports The Tax Foundation.
Federal income tax is calculated by considering all income, relevant deductions and any payments, as noted by Forbes. Federal income tax regulations are dynamic, meaning that the specific guidelines vary from period to period.
The most reliable federal tax calculator can be found on the IRS's website. This calculator allows individuals to determine what amount will be owed or returned when it comes time to file taxes.
An early version of the federal inheritance tax, also known as the estate tax, was first authorized by Congress in 1797 and took the form of a stamp act, according to the Heritage Foundation. Multiple subsequent estate taxes were enacted over the next 200 years.
An inheritance tax is a tax paid by heirs or beneficiaries of an inheritance, according to Investopedia. An inheritance tax rate depends on the value of the asset received or the relationship to the descendant.