Before we look at the step-up in basis and a potential change that looms over the horizon, we should take a look at the broader tax picture. Most of the things that you need to know about how taxes can influence inheritances are surprisingly positive. An inheritance is not looked upon as taxable income by the IRS or state tax authorities, and this applies to insurance policy proceeds and direct bequests. If you bequeath an individual retirement account to a beneficiary, the distributions … [Read more...] about Inheritance Planning and the Step-Up in Basis
They say that elections have consequences, and this is definitely true. Whether or not the consequences are to your liking will depend upon the circumstances. This dynamic is going to play itself out in the near future, because 2020 is an election year. There could potentially be some changes in the tax structure that impact the taxes that are paid on inheritances. We will look at the details in this post. Federal Estate Tax Exclusion The federal estate tax looms large for very wealthy … [Read more...] about Estate Tax Could Be Expanded After Election
When money is changing hands, the tax man will usually want a piece of the action. Given this reality, people have questions about how taxation can impact inheritances. We will provide some answers to some of the typical questions that we hear in this blog post. Do you have to report an inheritance on your income tax returns? The answer to this question is generally no, and this is surprising to many people. An inheritance is not considered to be taxable income because the person that left you … [Read more...] about Answers To Estate Taxation Questions
Before we get to the increase in the estate tax exclusion, we should explain how taxes apply to inheritances in a broad sense. Many people assume that you are required to report an inheritance when you file your regular income taxes, but this is not the case. Inheritance is not taxable income for a logical reason. Assets that comprise estates are left over after the decedents paid taxes throughout their lifetimes. For example, if a person saved a certain amount of money every pay period for … [Read more...] about Estate Tax Exclusion Has Been Increased
Do you know that there is a gift tax in the United States? Before you start to get worried about all the gifts that you have received over your lifetime without paying any taxes, it is unlikely that you violated any laws. We have a federal estate tax, but most people do not have to pay it because there is a large exclusion. This is the amount that can be transferred before the tax applies. At the time of this writing in 2019, the exclusion is $11.4 million. Each year there are adjustments … [Read more...] about Understanding the Federal Gift Tax
Since the tax man seems to be involved in every financial transfer imaginable, you may assume that your family will be forced to pay some type of estate taxes. We are glad to be able to tell clients that in fact, most people do not have to worry about this form of taxation. However, those who do are facing a maximum rate of 40% that can have a very serious impact. In this post, we will provide five key pieces of information about death taxes that will give you a basic but broad understanding … [Read more...] about Five Things to Know About Estate Taxes
We often respond to clients who have questions about how taxation can enter the picture when assets are changing hands after someone dies. This is certainly understandable, and perhaps surprisingly, most of the news that we pass along is good news. Generally speaking, inheritances are not considered to be regular income for federal or state tax purposes. Plus, you get a step-up in basis if you inherit appreciated property. This means that for capital gains tax purposes, you are not … [Read more...] about Inheritance Tax Can Impact Kentucky Residents
When you are engaged in your estate planning efforts, it is natural to be concerned about estate taxation. Most people have heard the terms “estate tax” and “death tax” and in this blog post, we will provide some clarity about postmortem asset transfers and taxes. The Federal Estate Tax The federal estate tax is applicable in all 50 states, and sometimes people will refer to it as the death tax. This levy carries a 40 percent maximum rate so it can potentially consume a very significant chunk … [Read more...] about Will My Estate Be Subject to Taxation?
You may wonder if you can leave your estate to your spouse tax-free, Before we answer this question, let's take a general look at taxes as they apply to bequests. Income Tax It seems as though you are asked to pay income taxes any time you receive an influx of money. This can lead to the believe that your spouse may be required to report an inheritance as income. This is not the case. An inheritance would not be looked upon as taxable income by the Internal Revenue Service. However, it should … [Read more...] about How Can I Leave My Estate to My Spouse Tax Free?
Some people who are potentially exposed to the estate tax would not consider themselves to be "wealthy." They earn a decent living as farmers, but they are certainly not living the lifestyles of the rich and famous. Many farmers own large pieces of land that have been in the family for generations. Over time it has appreciated considerably, and its value may exceed the estate tax exclusion amount. This concern weighed heavily on the minds of many farmers as 2013 approached. Without new tax … [Read more...] about Farmers Get Break Via New Tax Act