No one complains when inheriting money or property, but when it comes to unpaid taxes or hidden money, the transfer process may not be so simple. According to the IRS, "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." Various factors determine whether taxes need to be paid on property or money left in the inheritance.
No Tax Cases
Usually, there is no tax if a gift of property or money is paid to the spouse or a charity. If a gift is made to someone else, taxes might not apply if the value of the gifts exceeds the annual exclusion for the current tax year. When inheriting property or money, you should check the year's annual exclusion for the gift tax.
At the time of death, an account of everything owned by the deceased must be conducted. The fair market value of the items is calculated, not the value of the items at the time of purchase.
Taxpayers may also want to consider certain deductions that are allowed on the gross estate, which is the total of all items owned by the deceased. Gross estate includes life insurance proceeds payable to your estate, or if you owned the policy, to your heirs; value of certain annuities payable to your estate or your heirs; and the value of certain property you transferred within three years before death.
Deductions may be claimed on mortgages and other debts, estate administration expenses, qualified charities and property that are passed to the surviving spouse. Deductions can also be claimed on certain farms and operating business interest.
It is advisable to consult a tax specialist to understand the tax liability and benefits when property or money is inherited. In case of hidden money, the help of a tax professional becomes necessary.
Labels: IRS, Tax Deductions, Taxpayers