Do I Need to Pay an Inheritance Tax?

You wouldn’t have to pay an inheritance tax even if you live in a state that has one if the decedent didn’t live and die there as well. An exception to this rule exists if you inherit real property that’s located there. The tax is applied by the decedent’s state of residence and the property’s location.8

For example, you would not have to pay a New Jersey estate tax if you live there but your uncle, who lived in New York, left you $10,000 in his will. But you would have to pay the tax if your uncle lived in New Jersey, regardless of where you reside.

Key Takeaways

  • As of 2020, an inheritance tax is imposed by six states on the value of a single bequest made to a beneficiary.
  • The federal government does not tax inheritances.
  • The beneficiary, not the estate, is responsible for paying the inheritance tax, but some estate plans provide for the estate to pay the tax for them.
  • Speak with a local accountant or estate planning attorney if you think you might be subject to an inheritance tax because the rules can vary somewhat by jurisdiction.

NOTE: The information contained in this article is not tax or legal advice and it’s not a substitute for such advice. State and federal laws change frequently, and this information might not reflect your own state’s laws or the most recent changes to the law. Please see a local tax professional or attorney for current laws and rules in your area.

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