Inheritance tax and inheritance law in United States
September 12, 2016
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in United States: what restrictions there are and whether making a will is advisable.
How high is income tax on residents in United States?
An estate tax and a generation-skipping transfer tax are levied on the estate of the deceased at the federal level. State governments also impose their own taxes on inheritances.
Estate tax and generation-skipping transfer tax are being phased out between 2002 and 2009. These taxes will be fully repealed in 2010. The phase-out is gradually being applied through a decrease in the maximum tax rate and an increase in the amount of the applicable exclusion.
However, the legislation that repeals the estate tax and the generation-skipping transfer tax will expire in 2010. Further legislative action will be required to determine the status of the estate tax and the generation-skipping transfer tax after 2010.
An estate tax is levied at the federal level. The tax is imposed on the value of the estate of the deceased at the time of death. Certain deductions apply.
|TAX BASE, US$||TAX RATE|
|Up to US$10,000||18.00%|
|US$10,001 - US$20,000||20% on band over US$10,000|
|US$20,001 - US$40,000||22% on band over US$20,000|
|US$40,001 - US$$60,000||24% on band over US$40,000|
|US$60,001 - US$80,000||26% on band over US$60,000|
|US$80,001 - US$100,000||28% on band over US$80,000|
|US$100,001 - US$150,000||30% on band over US$100,000|
|US$150,001 - US$250,000||32% on band over US$150,000|
|US$250,001 - US$500,000||34% on band over US$250,000|
|US$500,001 - US$750,000||37% on band over US$500,000|
|US$750,001 - US$1,000,000||39% on band over US$750,000|
|US$1,000,001 - US$1,250,000||41% on band over US$1,000,000|
|US$1,250,001 - US$1,500,000||43% on band over US$1,250,000|
|US$1,500,001 - US$2,000,000||45% on band over US$1,500,000|
|US$2,000,001 - US$2,500,000||49% on band over US$2,000,000|
|Over US$2,500,000||50% on all value over US$2,500,000|
- Expenses and losses
- Mortgages and debts
- Taxes imposed by U.S. states or foreign countries on transfers made for public, charitable or religious purposes
- Bequests to qualified charities
- Bequests to a surviving spouse, provided that the spouse is a US citizen
- Expenses, losses, mortgages, debts and taxes may only be deducted in the proportion that the value of the gross estate situated in the U.S. bears to the value of the total gross estate wherever situated;
- Charitable bequests made to a U.S. domestic charity
- A marital deduction, which may only be claimed for property situated in the U.S.
Between the years 2002 and 2009, the estate tax is gradually being abolished and will be fully repealed by 2010. The phase-out is gradually being applied through a decrease in the maximum tax rate and an increase in the amount of the applicable exclusion.
EXCLUSION AMOUNT FROM 2004-2015
|YEAR||APPLICABLE EXCLUSION, US$|
GENERATION-SKIPPING TRANSFER TAX (GSTT)
A generation-skipping transfer tax is applicable to transfers to beneficiaries who are more than one generation younger than the transferor. The rates are the same as the maximum tax rate for the estate tax, and beginning 2004, the same exclusion given for estate tax is applicable to GSTT.