When a loved one passes away, you may receive money, property, and other assets through a will. This is known as an inheritance, and you may be required to pay taxes on it. These taxes are a state tax, meaning that there are no federal taxes on inheritance. Each state has different tax rules and charges varying amounts for assets gained. Some states don’t even require you to pay an inheritance tax.
Sometimes, estate and inheritance taxes can become mixed up and confused. If you’re told that you are required to pay a federal tax on your inheritance, you may be thinking of an estate tax. An estate tax is different from an inheritance tax and is paid by the estate before the assets are transferred to the beneficiaries. If you are unsure, you can call or speak to a tax professional who can outline exactly what you owe and when the amounts are due.
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