Inheritance tax and inheritance law in United States

September 12, 2016

The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in United States: what restrictions there are and whether making a will is advisable.

INHERITANCE TAX


How high is income tax on residents in United States?

An estate tax and a generation-skipping transfer tax are levied on the estate of the deceased at the federal level. State governments also impose their own taxes on inheritances.

Estate tax and generation-skipping transfer tax are being phased out between 2002 and 2009. These taxes will be fully repealed in 2010. The phase-out is gradually being applied through a decrease in the maximum tax rate and an increase in the amount of the applicable exclusion.

However, the legislation that repeals the estate tax and the generation-skipping transfer tax will expire in 2010. Further legislative action will be required to determine the status of the estate tax and the generation-skipping transfer tax after 2010.

Estate Tax

An estate tax is levied at the federal level. The tax is imposed on the value of the estate of the deceased at the time of death. Certain deductions apply.


ESTATE TAX

TAX BASE, US$ TAX RATE
Up to US$10,000 18.00%
US$10,001 - US$20,000 20% on band over US$10,000
US$20,001 - US$40,000 22% on band over US$20,000
US$40,001 - US$$60,000 24% on band over US$40,000
US$60,001 - US$80,000 26% on band over US$60,000
US$80,001 - US$100,000 28% on band over US$80,000
US$100,001 - US$150,000 30% on band over US$100,000
US$150,001 - US$250,000 32% on band over US$150,000
US$250,001 - US$500,000 34% on band over US$250,000
US$500,001 - US$750,000 37% on band over US$500,000
US$750,001 - US$1,000,000 39% on band over US$750,000
US$1,000,001 - US$1,250,000 41% on band over US$1,000,000
US$1,250,001 - US$1,500,000 43% on band over US$1,250,000
US$1,500,001 - US$2,000,000 45% on band over US$1,500,000
US$2,000,001 - US$2,500,000 49% on band over US$2,000,000
Over US$2,500,000 50% on all value over US$2,500,000

Deductions


For Residents

  • Expenses and losses
  • Mortgages and debts
  • Taxes imposed by U.S. states or foreign countries on transfers made for public, charitable or religious purposes
  • Bequests to qualified charities
  • Bequests to a surviving spouse, provided that the spouse is a US citizen

For Non-Residents

  • Expenses, losses, mortgages, debts and taxes may only be deducted in the proportion that the value of the gross estate situated in the U.S. bears to the value of the total gross estate wherever situated;
  • Charitable bequests made to a U.S. domestic charity
  • A marital deduction, which may only be claimed for property situated in the U.S.

Between the years 2002 and 2009, the estate tax is gradually being abolished and will be fully repealed by 2010. The phase-out is gradually being applied through a decrease in the maximum tax rate and an increase in the amount of the applicable exclusion.

EXCLUSION AMOUNT FROM 2004-2015

YEAR APPLICABLE EXCLUSION, US$
2004 US$1,500,000
2005 US$1,500,000
2006 US$2,000,000
2007 US$2,000,000
2008 US$2,000,000
2009 US$2,000,000
2010 US$3,500,000
2011 US$5,000,000
2012 US$5,000,000
2013 US$5,120,000
2014 US$5,340,000
2015 US$5,430,000

GENERATION-SKIPPING TRANSFER TAX (GSTT)

A generation-skipping transfer tax is applicable to transfers to beneficiaries who are more than one generation younger than the transferor. The rates are the same as the maximum tax rate for the estate tax, and beginning 2004, the same exclusion given for estate tax is applicable to GSTT.

 

Comments

Irma Saud | May 15, 2010

I am trying to find if there are any inheritance tax in the USA on inheritance from another country. The amount will not be over $20,000.

Miller | September 12, 2013

According to a pair of recent surveys, increasingly more people approaching retirement are ill-prepared for it. Most are not even mindful of the true expenses that lay ahead of them. As a consequence, the custom of leaving a financial legacy for you kids is rapidly becoming a quaint custom of the past. Get a financial support to help pay for your retirement costs.

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