How much money can I inherit tax-free? We hear this question from many people who request our services. When you inherit a sum of money, you have many other things on your mind, too. You may still be mourning the loss of the loved one who left you the money, and you may have many issues to deal with related to your family and friends, too.
Researching the answer to your probate-related questions can take up your precious time. You want answers to your questions quickly, but first, you need to understand a few basic finance-related concepts.
Estate Taxes and Inheritance Taxes
Many people confuse inheritance taxes with estate taxes. The executor takes state taxes out of the amount you inherit before you can receive the money. This sum may include taxes on:
You will not be required to pay this tax because it should be levied before you get your inheritance. The estate tax’s amount depends on how big the estate is and where the deceased lived before they passed away. Each state has different estate tax laws, but the federal government limits how much estate tax is collected.
Any estate worth more than $11.8 million is subject to estate tax, and the amount taken out goes on a sliding scale depending on how much more than $11.8 million the estate is worth. If the estate is appraised for up to $1 million more than that threshold, the estate tax can be in excess of $345,000.
States may also have their own estate tax — 15 states and Washington, D.C., have estate tax provisions. While you won’t pay these taxes yourself, the estate tax will determine how much you inherit and may decrease that amount.
How Much Money Can You Have Before Probate?
The short answer is that you can inherit a significant sum of money without paying state or federal income taxes. The federal government does not have an inheritance tax, but half a dozen states do:
Even these states vary when it comes to the implementation of the inheritance tax. The amount of taxes the estate pays before the inheritors receive their money may also rise and fall based on the estate’s worth.
Other Types of Taxes on Inheritance
Many people who inherit money from a loved one receive their bequest in a form other than cash. For example, you may have stock options or real estate. In these cases, to gain the value of the stock or property, you’ll need to sell it off and pay capital gains taxes. These earnings are subject to capital gains taxes on a sliding scale, so the more you inherit, the more you’ll pay.
Learn More About Inheritance Law Tax
Inheritance Funding can answer your questions about how much money you can inherit tax-free and outline how tax laws can impact your inheritance. Contact us to learn more about our services.