inheritance tax
Inheritance tax, also referred to as legacy or succession tax, is a type of state tax that must be paid by a beneficiary or heirs of property or assets from who receives property from the will of a testate or intestate succession . Unlike an estate tax , the inheritance tax is levied against the beneficiary of an estate , and not against the estate itself.
As of October 2024, six states– Iowa , Kentucky , Maryland , Nebraska , New Jersey , and Pennsylvania –currently impose an inheritance tax, with Iowa repealing the inheritance tax in January 2025. Each state determines their own rules for who the tax applies to and how much they must pay. Generally, states exempt immediate family members from having to pay inheritance taxes; however, not all states apply this exception. Additionally, more distant family members usually do not receive an exemption. Further, most states place beneficiaries in different tax brackets based on the closeness of a beneficiary’s relation to the decedent, the amount a beneficiary receives, or both. For example, in Pennsylvania , the inheritance tax for a surviving spouse or parent is 0 percent, and the inheritance tax for siblings is 12 percent.
[Last reviewed in October of 2024 by the Wex Definitions Team ]
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