IRS and Federal Inheritance Tax Laws for 2014
The federal inheritance tax is something that
is paid after an original property owner passes away and the ownership of the
property is transferred to their heir. Federal inheritance
taxes
are also commonly referred to as estate taxes. These taxes are calculated based
on whatever the market value of the property is when it is transferred to the heir.
Depending on where you live, this tax law may be referred to as estate tax, inheritance tax, or possibly death duty.
While it is fairly common for these terms to be used interchangeably, it is not very accurate to use estate taxes in place of inheritance taxes because they mean very different things in the United States. Representatives of a deceased property owner are responsible for estate taxes and the beneficiary (heir) of the deceased property owner is responsible for inheritance taxes.
In order to determine whether or not you are required to file a return under the Federal IRS Inheritance tax laws, you should start by compiling a list of all the assets you have received. You will also need to place a fair market value on each of the assets on your list. The total amount of the assets you have inherited will determine your inheritance tax.
Unfortunately, the total amount that requires a tax payer to file for an inheritance tax return does vary from one state to the next. Most tax payers will learn that the amount that their state requires for a return is a great deal lower than what federal generally requires.
Gifting Strategies
For anyone looking to reduce taxes or a way to make it possible for them to pass on assets to their next generation tax free there are gifting options they can use. These gifting strategies include:
Annual Exclusion Gifting
The annual exclusion-gifting amount that a taxpayer can gift to someone individual has been gradually increasing every year. In 2012, individuals could give $13,000. In 2013, individuals can give $14,000.
This means that this year you can gift $14,000 (individually) to as many people as you like. Keep in mind, you can bestow $28,000 upon a married couple. This method will not eat away at your lifetime exemption.
Direct Payments for Education or Medical Bills
Payments that are made directly towards a loved one's education or medical bills are not considered taxable gifts by the government. This means they will not count against an individual lifetime, maximum gift, or annual exemptions.
Depending on where you live, this tax law may be referred to as estate tax, inheritance tax, or possibly death duty.
While it is fairly common for these terms to be used interchangeably, it is not very accurate to use estate taxes in place of inheritance taxes because they mean very different things in the United States. Representatives of a deceased property owner are responsible for estate taxes and the beneficiary (heir) of the deceased property owner is responsible for inheritance taxes.
In order to determine whether or not you are required to file a return under the Federal IRS Inheritance tax laws, you should start by compiling a list of all the assets you have received. You will also need to place a fair market value on each of the assets on your list. The total amount of the assets you have inherited will determine your inheritance tax.
Unfortunately, the total amount that requires a tax payer to file for an inheritance tax return does vary from one state to the next. Most tax payers will learn that the amount that their state requires for a return is a great deal lower than what federal generally requires.
Gifting Strategies
For anyone looking to reduce taxes or a way to make it possible for them to pass on assets to their next generation tax free there are gifting options they can use. These gifting strategies include:
Annual Exclusion Gifting
The annual exclusion-gifting amount that a taxpayer can gift to someone individual has been gradually increasing every year. In 2012, individuals could give $13,000. In 2013, individuals can give $14,000.
This means that this year you can gift $14,000 (individually) to as many people as you like. Keep in mind, you can bestow $28,000 upon a married couple. This method will not eat away at your lifetime exemption.
Direct Payments for Education or Medical Bills
Payments that are made directly towards a loved one's education or medical bills are not considered taxable gifts by the government. This means they will not count against an individual lifetime, maximum gift, or annual exemptions.