When you die you will not be able to take any material things with you. You will leave them behind, for your children, your family, your friends or charity. In any case the government will never fail to get its fair share.
The Difference Between Inheritance and Estate Tax
Inheritance tax and estate tax is not the same thing. Your estate is your entire possessions including debts that you leave behind when you die. An executer named in the will or appointed by the law is going to pay off all outstanding debts and will liquidate property if needed for it. Administrative cost and funeral expenses are taken out after that. Everything left behind is what the heirs will receive but not before the federal government takes tax.
Now on the other hand inheritance tax is given when the heirs get their payouts and a tax on the amount received is paid by the heir. It is possible that an estate is taxed twice, first by the federal estate tax then by the state inheritance tax.
There are several ways you can avoid or cut down on inheritance and estate taxes. Some of them involve complex financial structures. If you are the type of person who has millions of dollars of estate to worry about then you need to hire expert advice as you work on your tax preparation in South Orlando. For smaller estates exemptions are categorized two ways. Relation based and amount based exemptions. In either case exemptions are put on taxable amount before the governments percentage officially comes out. This means that an estate tax can use an exemption only once.
Amount based exemptions are where the current limit is $5 million for a taxpayer and $10 million for a couple. If an estate is really that worthy or less than that, they are saved from any tax being levied. Think about it, if an estate is shrunken down to $5 million or less than that, the estate goes tax free.
However state inheritance tax has published varying thresholds, making things a little more complex. There are exemptions for some family members but that is it.
Mortgage property in the estate is deductable by the mortgage amount. Plus farms and a family business can be taxed at a reduced rate. This way the business is passed down to the children without being bankrupt.
As established above the exact inheritance tax varies from state to state. However they are set up on a progressive scale. The rule that is followed to do this is that the more valuable the estate the higher will be the tax rate. Also the tax bracket to an extent depends on your relationship to the deceased as well.
If you need more information about our South Orlando accounting and tax services, please contact us at 407-344-1012. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, Clermont, Davenport, Hunters Creek, Lake Nona, Celebration, Winter Park, Windermere, Dr. Phillips, Maitland, Altamonte Springs, Winter Garden, Ocoee, Apopka, Belle Isle, Edgewood, and Oakland FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin number, incorporations, and non profit 501c3 tax exempt. (Freedomtax’s accounting and tax professionals are NOT CPA’s. CPA services provided by third party provider.)