INHERITANCE TAX

 

 

How high is income tax on residents in United States?

An estate tax and a generation-skipping transfer tax are levied on the estate of the deceased at the federal level. State governments also impose their own taxes on inheritances.

 

Estate tax and generation-skipping transfer tax are being phased out between 2002 and 2009. These taxes will be fully repealed in 2010. The phase-out is gradually being applied through a decrease in the maximum tax rate and an increase in the amount of the applicable exclusion.

 

However, the legislation that repeals the estate tax and the generation-skipping transfer tax will expire in 2010. Further legislative action will be required to determine the status of the estate tax and the generation-skipping transfer tax after 2010.

 

Estate Tax

 

ESTATE TAX

TAX BASE, US$ TAX RATE

Up to US$10,000  18.00%

US$10,001 - US$20,000  20% on band over US$10,000

US$20,001 - US$40,000  22% on band over US$20,000

US$40,001 - US$$60,000  24% on band over US$40,000

US$60,001 - US$80,000  26% on band over US$60,000

US$80,001 - US$100,000  28% on band over US$80,000

US$100,001 - US$150,000  30% on band over US$100,000

US$150,001 - US$250,000  32% on band over US$150,000

US$250,001 - US$500,000  34% on band over US$250,000

US$500,001 - US$750,000  37% on band over US$500,000

US$750,001 - US$1,000,000  39% on band over US$750,000

US$1,000,001 - US$1,250,000  41% on band over US$1,000,000

US$1,250,001 - US$1,500,000  43% on band over US$1,250,000

US$1,500,001 - US$2,000,000  45% on band over US$1,500,000

US$2,000,001 - US$2,500,000  49% on band over US$2,000,000

Over US$2,500,000  50% on all value over US$2,500,000

 

 

An estate tax is levied at the federal level. The tax is imposed on the value of the estate of the deceased at the time of death. Certain deductions apply before the tax is levied.

 

Deductions

 

 

 

For Residents

 

Expenses and losses

Mortgages and debts

Taxes imposed by U.S. states or foreign countries on transfers made for public, charitable or religious purposes

Bequests to qualified charities

Bequests to a surviving spouse, provided that the spouse is a US citizen

 

 

For Non-Residents

Expenses, losses, mortgages, debts and taxes may only be deducted in the proportion that the value of the gross estate situated in the U.S. bears to the value of the total gross estate wherever situated;

Charitable bequests made to a U.S. domestic charity

A marital deduction, which may only be claimed for property situated in the U.S.

 

 

Between the years 2002 and 2009, the estate tax is gradually being abolished and will be fully repealed by 2010. The phase-out is gradually being applied through a decrease in the maximum tax rate and an increase in the amount of the applicable exclusion.

 

2007 ESTATE TAX RATES

YEAR APPLICABLE EXCLUSION, US$ MAXIMUM ESTATE TAX RATE

2002 US$1,000,000  50%

2003 US$1,000,000  49%

2004 US$1,500,000  48%

2005 US$1,500,000  47%

2006 US$2,000,000  46%

2007 US$2,000,000  45%

2008 US$2,000,000 45%

2009 US$3,500,000  45%

 

 

GENERATION-SKIPPING TRANSFER TAX (GSTT)

A generation-skipping transfer tax is applicable to transfers to beneficiaries who are more than one generation younger than the transferor. The rates are the same as the maximum tax rate for the estate tax, and beginning 2004, the same exclusion given for estate tax is applicable to GSTT.