Taxpayer asks:
I recently inherited a substantial (for me) amount of money. I used it to buy a home and to pay off some bills. I have been told I will have to pay inheritance tax and I have also been told it would not be inheritance tax, but income tax I will owe on this. Which tax would I pay? and approximately how much? I’m looking for a (ballpark) percentage. The amount was just over $100,000. I invested some in a money market CD to help with taxes. Is it enough?
Taxgirl says:
With that amount, you would not be subject to federal estate tax. You may be subject to state inheritance tax, depending on where you live.
The rules for inheritances vary from state to state – and there is no percentage that I can even ballpark. Some states like Pennsylvania tax at different rates depending on your relationship to the decedent. Others tax a flat rate. I would strongly recommend that you contact an attorney.
With respect to the income tax, generally, inheritances are not subject to income tax. That said, it depends upon the nature of the inheritance. Tax-deferred assets or assets that carry income (retirement plans or certain trusts, for example) would have an income tax component.
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
RE: Tax the Ask Girl
Dear Ask Girl, I did not inherit a large sum of money but would like to meet someone who did. Could you please forward all available information about the person above, including contact information, location of the money, etc.?
Do that for me, and I’ll get you a rare Roni Deutch autographed copy of the 1040 EZ instructions for Christmas.
http://www.franchisepick.com/the-great-b5media-blog-off-ask-the-tax-girl-marathon/
Sean,
You crack me up!
Of course, you know that I keep all of that stuff private. Unless, of course, Luke Wilson contacts me – and then I may have to reveal! 😉
i would like to know how much of an inheritace tax would have to be paid on $18,500, ooo .oo in co. &in the US from UNITED kINGDOM &recently found out i could be next of kin this person died about 1992 i would like to know what percentage would have to be paid out?
Um, my guess is that this is a scam – I get lots of these emails advising me that I may have won/inherited money. So, please be careful.
That said, you’re looking at about 45% in federal estate tax plus any applicable state taxes.
Tax Girl,
My brother-in-law (resident of Wisconsin) recently passed away and left his estate to his two sisters. One lives in Texas and one in Minnesota. I know that estate tax is due to the federal government on anything over $3.5 million. Which state or states are due inheritance tax, if any? How about state estate tax? Thanks.