Federal Inheritance Tax Rate
There is no federal inheritance tax on the assets received by an individual from a deceased person. Instead, the federal government imposes a federal estate tax, which applies to the total value of an estate before distribution to heirs. The federal estate tax rates vary based on the size of the estate.
As of 2023, the federal estate tax exemption is set at $12.92 million, increasing to $13.61 million as of 2024. Estates valued below these amounts are not subject to federal estate tax. The tax is only assessed on the portion of an estate that exceeds these exemption thresholds.
The federal estate tax rates range from 18% to 40%, applied on a sliding scale based on the value of the estate. The highest tax rate of 40% is imposed on estates valued well above the exemption amount.
It’s important to note that the federal estate tax is not directly paid by beneficiaries who inherit assets, but by the estate itself before distribution to heirs. Proper estate planning can help individuals minimize their estate tax liabilities and ensure that more assets are passed on to their intended beneficiaries. Consulting with tax professionals or estate planning attorneys can provide valuable guidance in navigating federal estate tax laws and planning strategies.
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