Estate taxes and inheritance taxes are levied on your property after your death. Most of the time, only those who are really affluent need to be concerned about shielding their life’s work from these hefty taxes, but this is not always the case. Therefore, it is crucial that everyone is aware of the many sorts of taxes that they may encounter and how to reduce their exposure to them. To know more about estate planning in Ridgeland, make sure you read more.
Estate, inheritance, gift, and income taxes are the four main types of taxes.
- Taxes on estates
Both the federal government and several state governments levy estate taxes. The federal estate tax exemption for individuals in 2022 is $12.06 million, and it is double that amount for married couples. Your assets are thus excluded from federal estate taxes if their combined value exceeds this limit.
Despite the fact that $12,060,000 is a sizable sum, the federal estate tax exemption is not set in stone and might soon decrease. The Tax Cuts and Jobs Act of 2017 established the present value and will sunset (or expire) in 2025.
- Estate and Gift Taxes
Some states charge inheritance taxes on the recipient of inherited property. The primary distinction between inheritance and estate taxes is that the former is borne by the beneficiary or receiver, while the deceased’s estate bears the latter.
There is no federal inheritance tax. In addition, the amount of the inheritance you received and your relationship to the dead will determine whether you owe inheritance taxes.
Once more, your best option for determining whether you need to be concerned about inheritance taxes is to consult an expert estate planning lawyer.
- Gift Taxes
When you give a gift of cash or property worth more than what the federal government has exempted, gift taxes can be applicable. A single taxpayer may give away up to $16,000 worth of assets in 2022 without submitting a gift tax return. This cap is yearly per recipient, so you may give more than one $16,000 gift in 2022 to several recipients without incurring the gift tax. Thus, making thoughtful annual gifts to loved ones is a good approach to both pass along assets and lessen your tax liability.
- Payroll Taxes
We include income taxes as the fourth key tax area to be thorough. The estate and retirement planning process should include developing an income tax strategy in consultation with an expert estate planning attorney, but going into specifics is outside the purview of this paper.