How Inheritance Taxes are Calculated?
When an inheritance tax is applicable, it is typically imposed on the portion of the inheritance that exceeds a certain exemption threshold. The exemption amount varies depending on factors such as the relationship between the deceased and the beneficiary. Generally, the closer the familial relationship, the higher the exemption and the lower the tax rate.
Inheritance tax rates often start in the single digits and may increase on a sliding scale to around 15% to 18%. However, these rates can vary by jurisdiction. Surviving spouses are usually exempt from inheritance tax in states where it is levied. Some states also provide exemptions for domestic partners, such as in New Jersey. Descendants, like children or grandchildren, may be subject to inheritance tax in certain states, such as Nebraska and Pennsylvania.
Overall, inheritance tax calculations consider both the exemption amount and the applicable tax rate, with variations based on the beneficiary’s relationship to the deceased and the laws of the specific state.