Inheritance tax in the United States: how is inheritance taxed in the USA?
Contrary to what many people think, the US levies several taxes, including inheritance tax.
I commented on the Federal Income Tax in this article, as well as on other taxes levied in the US, such as the Sales Tax and the Income Tax, in this article.
The central theme of this article will be inheritance tax, which is levied through two taxes: the Inheritance Tax and the Estate Tax.
Before going into the central theme of the article, it is worth explaining about Tax Residency.
What is Tax Residency?
Tax residence is the place where an individual carries out their vital economic activities. This place can be their fixed residence or their habitual residence.
Digital nomads do not have a fixed residence, but they do have a habitual residence. Therefore, the claim that, because they have no fixed abode, they don't have to file their taxes anywhere is false.
It doesn't matter if the digital nomad travels every 3 months, every month or every week, everyone in the world will have a tax residence somewhere.
If you declare taxes for two countries at the same time, you will have double tax residence, i.e. you will be subject to declaring and paying taxes for two countries at the same time.
What is the Inheritance Tax?
The Inheritance Tax is a tax levied by the states on those who receive an inheritance.
As of the publication of this article, there are 5 states that levy the Inheritance Tax:
a) Nebraska;
b) Iowa;
c) Kentucky;
d) Pennsylvania;
f) New Jersey.
This tax is levied on the share (value) that the heir received from the distribution. The forms of collection, exemptions and other particularities vary from state to state.
Therefore, those who live or intend to live in the United States need to consider the state where they live or intend to live and, with this, carry out adequate tax planning in order to avoid excessive tax payments, as well as tax evasion.
If you are interested in hiring professional legal services related to tax planning, we are a law firm specializing in the subject. To do so, please contact us via WhatsApp or by e-mail: thyanipuppio@gmail.com
What is Estate Tax?
Estate Tax is a tax levied on the deceased's estate, i.e. in a period before the assets are divided. The Estate Tax is levied immediately after the death of the deceased.
The Estate Tax is a federal tax that can also be levied by the states. In other words, the federal government levies this tax and the states have the option of collecting it.
At the federal level, in order to collect this tax, the gross estate that the deceased left after their death is assessed. Based on this calculation, the Estate Tax is levied. At the state level, the requirements and forms vary according to their respective legislation.
At the time of publication of this article, there is only one state that charges both Inheritance Tax and Estate Tax: Maryland.
At the time of publication of this article, there are 11 states that levy the Estate Tax:
a) Oregon;
b) Washington;
c) Minnesota;
d) Illinois
e) New York;
f) Connecticut;
g) Rhode Island;
h) Massachusetts;
i) Vermont;
j) Maine;
k) Hawaii.
Conclusion: there is the possibility of charging the Estate Tax twice.
Therefore, it is extremely important that those who live, intend to live or own property in the United States carry out proper tax planning, especially to avoid overpayments and tax evasion.
If you are interested in hiring professional legal services related to tax planning, we are a law firm specializing in the subject. To do so, please contact us via WhatsApp or by e-mail: thyanipuppio@gmail.com
A Warning about Dual Tax Residency
As mentioned above, individuals who have dual tax residency need to declare their taxes for two countries at the same time.
However, what few people know is that when you are a tax resident in a particular country, the principle of universal income declaration prevails. In other words, taxpayers must declare all their income, regardless of its origin.
Generally, individuals have the habit of declaring income from their country of origin only in their country of origin, and income from the USA only in the USA. However, by failing to comply with the duty to declare assets universally, the taxpayer commits a crime: tax evasion.
The United States exchanges tax information with various countries. This exchange of information is carried out through artificial intelligence, which searches and cross-checks the data of its taxpayers in order to detect fraud.
In addition to the risk of being criminally liable for tax evasion and thus having your passport invalidated, the amounts evaded could be collected by the tax authorities, with interest and monetary correction.
Those whose passports are invalidated will not be able to leave the country and will not be able to renew any visas, since the United States requires individuals to have a valid passport in order to apply for and remain on visas. In other words: no passport, no visa.
Remember: tax evasion is not just a crime in the USA.
If you are interested in hiring professional legal services to carry out tax planning and avoid double tax residency, tax evasion and double taxation, we are a law firm specializing in the subject. To do so, please contact us by e-mail: thyanipuppio@gmail.com, or by WhatsApp.
