How Are Inheritance Taxes Calculated
Not every state charges an inheritance tax and because each state that does charge the tax controls and calculates its own inheritance tax, each with individual rules and regulations, a straightforward answer to how inheritance taxes are calculated is not easy. Basically, each state determines a minimum threshold amount. Below this threshold, no inheritance taxes are charged. Any cash or property inherited above the threshold amount is charged a flat percentage rate.
For example, after 2006, the Tennessee government charges the inheritance tax when the total estate is valued at more than $1,000,000. After this exempted amount, a rate of 5.5 percent to 9.5 percent is charged in a graduated pattern. Tennessee allows its residents nine months to pay the inheritance taxes due and provides a specific form for the calculation and payment of these taxes.
In Indiana, the exemption amounts are based on the relationship between the decedent and the beneficiary. If the beneficiary is the surviving spouse, no inheritance tax is charged. When the beneficiary is lineal ancestor or descendent like a parent or child, the amount exempted from the inheritance tax is $100,000. The inheritance tax charged on the amounts above the exempted amounts are based on the cash amounts and type of property inherited and are calculated in graduated levels that include fixed fees and percentages ranging from 2 percent to 20 percent.