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Author: Admin | 2025-04-28
What Is Inheritance Tax? An inheritance tax is a tax imposed by some states on the recipients of inherited assets. In contrast to an estate tax, an inheritance tax is paid by the recipient of a bequest rather than the deceased's estate. The inheritance tax is not common in the U.S. In fact, just six states have an inheritance tax as of 2024. The taxation of an inheritance depends on the state in which the deceased lived or owned property, the value of the inheritance, and the beneficiary's relationship to the decedent.Key TakeawaysInheritance tax is a levy on assets inherited from a deceased person.An inheritance tax is levied on the value of the inheritance received by the beneficiary, and it is paid by the beneficiary.There is no federal inheritance tax.Inherited assets may be taxed for residents of Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.Whether you may pay inheritance tax depends on the amount of the inheritance, your relationship to the decedent, and the state in which the decedent lived. Investopedia / Candra Huff Understanding Inheritance Taxes There is no federal inheritance tax in the U.S. While the U.S. government taxes large estates directly—imposing estate taxes and, if relevant, income tax on any earnings from the estate—it does not impose an inheritance tax on those who receive assets from an estate. Inheritance taxes are collected by six U.S. states: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. However, Iowa will phase out its inheritance tax by 2025. When the Tax Applies Whether an inheritance will be taxed, and at what rate, depends on its value, the relationship of the beneficiary to the person who passed away, and the prevailing rules regarding where the decedent (the person with the estate) lived. That is, inheritance taxes may be assessed by the state
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