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2022 Estate and Inheritance Tax: What to Expect

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By: HeirSearch.

Inheritance or State tax is levied on the beneficiary and must be paid on assets left to them by the decedent. On the other hand, federal tax is paid directly by the estate.

The majority of estates aren’t large enough to be charged a federal estate tax, and as of 2022, estate taxes only apply if the decedent’s assets are worth more than $12.06 million, adjusted for inflation from 2021’s $11.7 million. The annual gift tax exclusion amount jumps to $16,000 for 2022, up from $15,000 where it sat since 2018.

What’s new for Estate Taxes in 2022?

In 2022, an individual can leave $12.06 million to their heirs without paying any federal estate or gift tax. Married couples can avoid taxes as long as the estate is valued at under $24.12 million. Additionally, the new higher exemption means that there’s room for them to give away another $720,000 in 2022.

Trusts and Estate Tax Rates of 2022

The IRS recently announced inflation adjustments for the 2022 tax year with Estate Tax rates and Trust tax. You can find all the details on tax rates in the Revenue Procedure 2021-45.

If taxable income is between: the tax due is:
$0 and $2,750 10% of taxable income
$2,750 and $9,850 $275 + 24% of the amount over $2,750
$9,850 and $13,450 $1,978 + 24% of the amount over $9,850
$13,450 $3,239 + 37% of the amount over $13,450

What States are Affected by Inheritance Tax and Estate Tax in 2022?

States that levy only inheritance taxes paid directly by your heirs: Iowa, Kentucky, Nebraska, New Jersey, and Pennsylvania.

States that levy only estate taxes: Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington (as well as Washington D.C).

States that levy both inheritance and estate taxes: Maryland is the only state that levies both an inheritance tax and an estate tax.

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