Q: Maryland Inheritance tax calculation. Based on amount before or after federal and state tax deductions?
I think I understand the "death" taxes in Maryland, but I am not positive on the calculations.
Are all taxes based on the value of the gross estate, or are some calculated based on the value after other taxes have been deducted?
Gross value of estate $20 million
Federal estate tax of 40% on value above $12.92 million (for 2023).
MD estate tax 16% on value above $5 million.
MD inheritance tax 10% (based on what? gross estate value, or value after above deductions?)
A: Taxes are imposed on the gross estate. There are exemptions, credits and deductions that are/may be applicable. You absolutely need to pay a CPA to do these taxes for this size of an estate, as well as have estate counsel for the estate administration (or trust distribution). There are too many things you do not even know you do not know. As for the 10% inheritance tax, it only applies to non-lineal heirs, non-spouses, and non-immediate family (not to children, grandchildren, siblings, spouse, parents). There is also a 9 month deadline for a surviving spouse to claim portability of their deceased spouse's Unified Credit, by which the $12.92M is thus doubled, as well as the fact that a surviving spouse inheriting from their deceased spouse has an unlimited credit/exemption on inheritance from the deceased spouse. If you miss what you need to know, or act when you do not even know about what you need to know, you may cost yourself dearly.
Maryland inheritance tax is based on the relationship of the giver to the recipient, and is not tied to other death taxes, so on a $20M estate this could be $2M, $0 or nearly anything in between. (And if the tax is paid "outside" of the gift, Maryland will "tax the tax" and calculate at 11.11%). Inheritance tax can be based on MORE than what passes at death (gifts given before death may count too). Immediate family members and descendants (husband/wife, son/daughter, grandchildren) are currently exempt from Maryland inheritance tax.
It isn't clear whether your question is hypothetical or whether you are trying to handle an actual estate. You are strongly encouraged to seek the advice of competent tax professionals to assist with filing federal and state tax returns and an estate attorney assist with any estate and/or trust administration.
While not legal advice, I hope this gives some helpful information on Maryland inheritance taxes.
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