Do Your Need Tax Advice for Inheritance?
Inheritance tax in the United States is sometimes called estate tax and it is imposed upon the taxable estate of a deceased person. On the other hand, the gift tax is imposes a tax on the transfer of property while the giver is still alive.
In addition to the federal government many states also impose an estate tax or sometimes called an inheritance tax. If an asset is left to a spouse or a charitable organization the tax usually doesn’t apply.
Inheritance Tax Planning and Advice
Inheritance Taxes
Inheritance taxes or estate taxes are calculated based on the fair market value of all of the property transferred to the beneficiary of the estate. Keep in mind, fair market value is what the property is worth today. The value of the asset or property is not what the original owner paid to obtain the asset.
For example, if we were talking about a house, the fair market value would be what the house was worth at the time the owner passed away, not what the owner paid for the home at the time of purchase.
Gross Estate
Gross estate is the fair market value for all of the property the deceased person has left for his or her loved ones. To calculate the gross estate you must add up the fair market value of things like property, bank accounts, cash, common stock, insurance, and similar items. When you have added all of the assets and property at their fair market value you then have calculated the gross estate.
The Net Value of the Estate
You have to think of this like balancing a business. You add up the value of everything you have and then you deduct everything you owe. Whatever profit you have left is the net value after you’ve paid all the bills. This is also similar to paying income taxes. You calculate how much money you made, you deduct all of your adjustments, deductions, and credits and then you will have your taxable income.
The same is true when calculating the net worth of an estate. You start with all of the assets and property inherited and then you add up all of the adjustments to the property. You deduct any balance due on the home for mortgage payment. You would pay off any outstanding loans and pay for all administration fees for the handling of the estate. All of these adjustments are subtracted from the gross estate which will bring you to the net value of the estate.
Taxable Estate
The next thing you have to do is add up all of the lifetime taxable gifts given since 1977. The final adjustment to the taxable estate is the credit known as the unified credit. At this current time, the unified credit is set at $1,000,000. The unified credit is then subtracted from the inherited estate to calculate your inheritance tax.
In reality not many Americans leave behind estates worth more than $1,000,000. If you were fortunate enough to inherit more than $1,000,000 then, you will have to calculate your inheritance tax.
Inheritance Tax Advice
My advice to you would be to use the Tax Experts at TurboTax Online to help you calculate your taxes. You only have nine months after receiving the estate to square away your taxes due on the inheritance if you end up having taxes due.
Most inheritance calculations are uncomplicated and can be taken care of by using an online tax preparation company. If you’ve had a death in the family then allow TurboTax Online to help you through this difficult time.