Will You Have to Pay Taxes on Your Inheritance?

In order to determine if you will need to pay taxes on your particular inheritance then you will need to consult current tax related laws. It is also necessary that you consult with an estate accountant or an attorney to determine if you will be required to pay taxes and which taxes are required. An inheritance can be subjected to three different forms of taxes, inheritance taxes, estate taxes, or income taxes. Only six states in the U.S. collect inheritance taxes and the State of Georgia is not one of them. Federal estate tax has an exemption of $ 5,340,000 meaning that any property less than the exemption amount is not required to pay federal estate taxes. State estate taxes are only required in only a few jurisdictions, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Tennessee, Vermont, and Washington.

So as long as the decedent the you are inheriting the assets from did not reside in any of the following states you will not be required to pay state estate taxes. Depending on the jurisdiction the estate may also have to pay a state death tax, but the state of Georgia doesn’t require a current tax. An inheritance by itself is not recognized by the state as income; however, if you receive property of a considerable amount you may be required to pay and income tax. If you inherit a home, IRA, 401(k), or lump sum then you will be required to pay an income tax. If the inheritance is to be awarded to a member of a foreign state outside of the jurisdiction of the United States then a special report of the gift is necessary and the report must be made with the IRS.

If you are not sure on whether or not you will be required to pay tax on your inheritance then you should consult with an estate attorney or an accountant. This should be done as soon as the property is received and a long time prior to the filing of your next tax return.