Q: What is the limit on inheritance before you have to pay tax? Is there a ceiling as in gifted money?
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A:
In the United States, there is no federal inheritance tax, but there is an estate tax that applies to the total value of an estate before it is distributed to the heirs. For 2024, the federal estate tax exemption is $12.92 million per individual. This means that an estate valued below this amount will not be subject to federal estate tax.
If you receive an inheritance, you generally do not pay taxes on the money or property itself. However, if the inherited assets generate income (like dividends, rent, or interest), that income is taxable. Also, some states have their own inheritance taxes, and the rules vary by state, so it's important to check local laws.
Gifted money follows different rules. The federal gift tax exclusion for 2024 allows individuals to give up to $17,000 per recipient annually without incurring gift tax. Lifetime gifts exceeding this annual limit are counted against the lifetime estate and gift tax exemption, which is $12.92 million. It's essential to consider both federal and state regulations when planning for inheritance and gifts.
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