Inheritance Tax Law Changes 2011, 2012

What is an Inheritance Tax? An inheritance tax is also referred to as a death tax because it is a tax that is imposed on all estate money and property after an estate owner passes away and leaves their estate or a portion of their estate to another person.

Who has to Pay the State Inheritance Tax?

The relationship of the deceased to the beneficiary plays a part in determining who will pay the tax and how much. Some close relatives can be exempt from inheritance tax by statute.

Some states that currently collect a tax on inherited estate money or property are Connecticut, Maryland, Massachusetts, New Jersey, Nebraska, Pennsylvania, Oregon, New York, Indiana, Kansas, Louisiana, and Iowa. Since each state is likely to tax their residents differently, individuals need to research the inheritance tax laws in their state.

How is the Inheritance Tax Calculated?

Trying to figure out the amount of tax that will be owed depends on two different things:

* The total value of the estate.

* Any arrangements that were made before the time of death.

What Inheritance Tax Law Changes can I Expect?

The inheritance exemption amount has been increased from $2,000,000 to $3,500,000. That is an additional $1,500,000 that you may inherit before having to pay taxes. This is subject to change depending on actions taken by congress.

Inheritance Tax Law Changes Annually

Inheritance tax laws change every year, so it is very important to stay informed about current inheritance tax laws. You will want to know the inheritance exclusion amount before you give money away and you will also want to know what the inheritance tax rates are at your current giving date. Who you give the funds to will also affect the inheritance tax rate.

There are online services available to help you determine your liability for inheritance tax. There are many benefits to preparing your tax return online. For example, if you have experienced any life changes throughout the year (marriage, new baby, have bought or sold a house) an online tax service can help. I have found TurboTax Online to be a great service.

They will guarantee the accuracy of your return to the IRS and the state tax agency for your state return. They also ask a series of questions to guarantee the biggest refund possible, and if you have any questions they have tax professionals available 24/7 to answer them. Visit TurboTax Online today to prepare and file your federal and state tax returns.