What are the tax implications of inheritance?
In Massachusetts, inheritance is subject to both state and federal taxes. The amount of tax due depends on the value of the inheritance, the type of assets received, and the relationship between the donor and the beneficiary. At the federal level, inheritance is generally not subject to income tax. However, taxes may be due if the estate and/or assets are subject to the federal estate tax. This tax applies to any estate valued over $11.4 million. Estates of any value may also be subject to state taxes depending on the state’s laws. In Massachusetts, any inheritance valued at $1 million or more is subject to both a death tax and a capital gains tax. In addition, if the beneficiary is receiving property or assets that have increased in value since they were bought, those gains must be reported to the IRS. The beneficiary will then be required to pay capital gains taxes on the increase in value. Finally, since inheritance is considered a gift, the donor, rather than the beneficiary, must pay the gift tax. This tax applies to any gift valued at over $15,000 per year. In summary, the tax implications of inheritance vary depending on the type of assets received and their value. It is important to note that the donor is usually responsible for paying any applicable taxes.
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