Earlier comments by a senior adviser referencing US inheritance tax law have sparked discussion on tax policies. While there is no such law at the federal level, certain states do impose inheritance or estate taxes. Let’s take a closer look at the current landscape.
Only six states have inheritance taxes as the federal government does not regulate such a levy. Iowa had been among them but is in the process of phasing it out entirely by 2025. The rates and exemption amounts vary, but they are generally calculated as a percentage of the inherited assets’ value above a threshold. Closer family relations are often exempt or subject to lower rates.
How the taxes work also differs – some are paid by the beneficiary, others by the deceased’s estate. Additionally, terms like inheritance tax and estate tax are sometimes used interchangeably to describe a tax on property passed to heirs. Overall, the rules and formulas can be complex as they have evolved independently within each state over time.
Beyond clarifying the current framework, this discussion highlights perspectives on when and how governments should collect tax revenues. As populations age and fiscal pressures mount, many experts foresee greater scrutiny of intergenerational wealth transfers. For now, the debate on inheritance tax appears far from resolved with reasonable arguments on both sides of this multifaceted issue.
