When a friend or loved one passes away, there are many details to work out in the process of settling his or her estate, including the home the decedent owned. This can be challenging to do in the midst of grief, especially if you aren’t familiar with what tax laws apply to certain properties. Many people who inherit a house from a person who’s recently passed might not anticipate the potential inheritance taxes that come along with the home, prompting them to look for a fast way to get the property off their hands.
In today’s article, we’ll take a closer look at inheritance taxes to gain a better understanding of them. At Cash 4 Kansas Homes, our home investors have more than 50 years of combined experience in the property investment business. We’ve bought countless inherited properties quickly for cash over the years, relieving the devisee of the unwanted home. If you’re in one of our many Kansas or Missouri service areas and recently inherited a property you weren’t expecting, contact us to discuss your potential selling options!
To fully grasp the concept of this financial enigma, it is essential to understand exactly what inheritance tax is. It’s also helpful to know what kind of factors go into calculating it, who assesses the tax, and what distinction there is between state and federal taxation on the matter.
What is Inheritance Tax?
As you might guess, in the broadest sense, inheritance tax is a tax that is imposed on a person who inherits property from another person. Depending on where you live, it can be assessed on everything from homes to money. It’s important to note the distinction between inheritance tax and estate tax. Many people use them interchangeably, but they are two different things.
While both of these taxes may be collected after someone dies, the similarities stop there. When a person bequeaths items to others through a will, a state inheritance tax will apply to each individual piece of property inherited. For this type of assessment, the beneficiary is responsible for paying the tax. Estate tax, on the other hand, is a federal tax that is assessed on the entire value of the decedent’s estate and the estate is responsible for paying the tax.
Inheritance Tax Calculation
You might find yourself wondering how the final tax amount owed on inherited items is calculated. As a rule of thumb, inheritance tax doesn’t come into play until after the decedent’s assets have been inventoried and dispersed to the beneficiaries. In states that access inheritance taxes, there are usually schedules that determine the percentage of tax owed, and this can range between five and 18 percent. Additionally, the value of the inherited property usually has to exceed a specific threshold to be taxed.
Is there ever a time when you’re exempt from paying inheritance taxes? It depends largely on your relationship to the deceased. In some states, spouses and children are usually exempt from inheritance taxes. If you have no blood or familial relationship to the decedent, it’s unlikely you’ll be exempt from the tax.
Just as income tax assessment laws and thresholds will vary from state to state, so will those applicable to inheritance taxes. How do you know whether or not you live in a state that enforces these taxes? A quick internet search will provide the answers, but for your convenience, we’ve addressed this too.
Does My State Assess an Inheritance Tax?
Inheritance tax is strictly a state-mandated process — there is no taxation from the federal government on individual inherited items. Currently, there are only six states in the United States that assess the tax. Residents of Kansas and Missouri will be happy to hear that your states are not included in the six. However, tax laws are ever changing, and if you’ve inherited a large-ticket item like a house, your best bet is to check with your local tax agency. The six states that impose an inheritance tax include:
- New Jersey
For residents in these six states, steep inheritance taxes can leave them scrambling as they try to figure out how to sell a house they don’t want.
What if I Inherit a Home from Another State?
The great news for Kansas and Missouri homeowners is that you should not be assessed with an inheritance tax if you inherit a home from a loved one that resides in the same state. However, what happens if you live in Kansas or Missouri and inherit a home in one of the six states listed above? Unfortunately, there is the potential to receive a tax bill from the other state if that state collects inheritance taxes. The amount of the bill will likely be based on the value of the property inherited and your relationship to the deceased.
Unwanted Inheritance in Kansas or Missouri?
If you’ve inherited a home and you’re unsure of what taxes might be assessed, your first call should be to a reputable tax professional. If you’re wondering how to sell a house you’ve inherited, your next call should be to Cash 4 Kansas Homes! Our team of professionals can assess your Kansas or Missouri property to make a fair, cash offer in as little as 48 hours. Even better, we can usually conclude your closing process within 14 days with the assistance of a local title company. It’s hard to find a better deal than that!
If you’re ready to sell your unwanted property, contact Cash 4 Kansas Homes at 913-276-0769 today!