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Inheritance Gift Tax

Estate, Gift & Inheritance Taxes

Death tax. Estate tax. Inheritance tax, people refer to it by many names.

Estate & Inheritance Tax

The money and property you own when you die (your estate) may be subject to federal estate tax and the gross income of your estate may be subject to federal income tax.

Inheritance tax, estate tax and death duty are the names given to various taxes which arise on the death of an individual. It is a tax on the estate, or total value of the money and property, of a person who has died.

Typically an estate tax taxes the personal representatives of the deceased, while an inheritance tax taxes the beneficiaries of the estate..

Gift Tax

If you give someone money or property during your life, you may be subject to federal gift tax.

Gifts you make during your life from your estate can also be subject to the generation-skipping transfer (GST) tax, if the gifts or bequests are to a person, such as a grandchild, who is more than one generation younger than you.

Most gifts are not subject to the gift tax and most estates are not subject to the estate tax.
  • There is usually no tax if you make a gift to your spouse or to a charity or if your estate goes to your spouse or to a charity at your death.
  • If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year.
To determine if the sale of inherited property is taxable, you must first determine your basis in the property. The basis of inherited property is generally one of the following:
  • The fair market value (FMV) of the property on the date of the decedent's death.
  • The FMV of the property on the alternate valuation date if the executor of the estate chooses to use alternate valuation.

If you sell the property for more than your basis, you have a taxable gain.

Inheritance tax is not all together the same as estate tax, though they do share some similarities and follow some comparable procedures. Inheritances are subject to some tax exemptions. And though inheritance tax rates can be high, they work in different ways depending on the inheritance and the state you live in.

References:

Publication 950 (9/2010), Introduction to Estate and Gift Taxes

Estae Gift Tax Rates

 

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