How is the U.S. inheritance tax levied?

The U.S. estate tax refers to the tax levied on the estate of the deceased and is levied by the U.S. federal government and some state governments. Inheritance tax is divided into federal estate tax and state estate tax according to different levels of collection. The federal estate tax in the United States adopts a total estate tax system. The entire estate of the deceased at the time of death is the object of taxation, the executor is the taxpayer, and the taxable estate amount is the basis for tax calculation.

The taxable inheritance amount is the balance of the total amount of the inheritance after deducting the funeral expenses, liabilities and related expenses of the deceased and inheritance losses, and then deducting the amount of items such as bequests, charity, marriage, etc. that are allowed to be deducted by tax law. The federal estate tax has a minimum rate of 8%, with 21 levels of progressive rates, with a maximum rate of 50%.

The calculation of tax amount is divided into two steps:

1. Calculate taxable income based on taxable income and applicable tax rate;

2. Unified deductions After credits and any tax credits allowed by tax law, the actual amount of estate tax owed by the taxpayer is determined.

Only 10 states in the United States levy estate taxes. The calculation and collection methods of state estate taxes are basically similar to the federal estate tax, but the tax rate is lower than the federal estate tax, and the amount of preferential exemptions is also smaller.

To avoid double taxation, when a federal estate tax and a state estate tax are imposed simultaneously, a deduction is allowed to offset the state estate tax when calculating the actual amount of federal estate tax payable.

The U.S. estate tax rate is 18%-50%, and the starting point is US$1 million. However, inheritance tax only applies to the children of the deceased, and the wife and parents are not required to pay. In 1999, the starting point was US$650,000 and the tax rate was super progressive, with the highest tax rate reaching 55%.

18% if the estate is less than $10,000.

20% if the estate is less than $20,000.

49% if the estate is less than $2.5 million.

50% if the estate exceeds $2.5 million.

The U.S. government imposes high taxes on the transfer of personal assets. Although this type of tax is commonly known as inheritance tax, it actually includes three personal asset transfer taxes: one is inheritance tax, one is gift tax, and the third is intergenerational asset transfer tax.

The inheritance designated by the government is equivalent to including all property owned by a person during his or her lifetime, including tangible and intangible, movable and immovable personal property. Such as currency, bonds, insurance policies, pensions, real estate, stocks, company stocks, intellectual property, property rights, etc.

The federal estate tax is overly progressive, with tax rates divided into 17 brackets, ranging from 18% to 55%. If a person wants to pass his property to descendants after his death, he needs to make a will in the United States before his death that clearly identifies who is the heir to the property.

If there is no will, a person’s property automatically passes to his or her spouse upon death. If a person has neither a will nor a spouse during his lifetime, there will be problems as to who will inherit the property once he dies. At that time, a court must decide whether the person's descendants can legally inherit the property.

Legal basis:

Article 27 of the "Interim Regulations on Inheritance Tax"

The scope of inheritance tax is those who have inheritance at home and abroad when a mortal dies, including Movable property, immovable property and all other items of property value.