The federal government may levy an estate tax on heirs based on the value of an estate at the time of the property owner’s death. As reported by Kiplinger Personal Finance magazine, if a one-person estate holder dies in 2021, his or her heirs may expect a tax liability if they receive property worth more than $11.7 million. Married couples can leave their heirs property valued at less than $23.4 million.
An estate’s worth falling within the first $1 million over the exemption amount may, however, result in a tax rate between 18% to 39%. The IRS may levy a tax of 40% on property worth greater than the first $1 million over the exemption amount.
Charitable contributions and gift tax exclusions
Individuals who plan to donate property to a charity or nonprofit organization may decide to do it while still alive. Charitable gifts or contributions may provide a tax deduction on an income tax return during the donation year. Gifted cash, cars and personal items may require a receipt from the organization to serve as a deduction.
The annual tax exclusion for an individual receiving a gift is $15,000 or $30,000 for a married couple. Each recipient may receive up to $15,000 per year without incurring a tax liability. If an individual receives more than $15,000, however, it may result in an estate tax of 40%, as noted by SmartAsset.
Texas estate, inheritance and gift taxes
Texas does not currently levy taxes on estates, inheritances or gifts. Individuals may leave or gift their property to heirs without incurring state tax liabilities.
An estate plan may, however, require several different legal strategies to minimize complications such as federal tax issues. Individuals wishing to leave property to their heirs may create a will or trust containing language that could reduce future liabilities.