At present, there is no such tax called as
Federal inheritance tax in the United States. Instead, it refers to the estate tax. When a person dies, the Federal government charges a tax on the estate of the deceased person and this is known as the estate tax.
The estate tax is not similar to an inheritance tax. The inheritance tax is still in application in some states of the U.S. The inheritance tax imposed by these states is known as death tax and they are charged on the properties and money after the death of an individual. Usually, this tax is imposed on the inheritors and the basis of calculation of this tax is dependent on the kinship with the deceased person and the inherited amount. The deceased person is also known as the decedent. Normally, the rate of this tax is charged as a proportional rate.
In the United States, the estate tax is levied on any transfer of estate (which is taxable) of a decedent. The transfer of property can be performed with the help of a will or subject to the state legislations regarding intestacy.
In the U.S., the estate tax is a constituent of the Unified Gift and Estate Tax System. The gift tax is another component of the system and this is levied on property transfers by way of gifts when an individual is alive.
The gift tax plays an important role in the prevention of avoidance of estate tax if an individual intends to gift his properties earlier to his death.
The estate tax in the United States is also known as the Federal estate tax. The initial step for calculating the estate tax is known as the gross estate. When particular deductions are made from the amount of gross estate, the resultant amount is known as the taxable estate.
The deductions include the following:
- Administrative charges, funeral expenses, as well as claims placed for the estate
- Specific charitable contributions
- Particular estate items, which have been bequeathed to the living partner
- Estate taxes or inheritance taxes paid to the district of Columbia or other states in the U.S. since 2005
The form used for filing estate tax in the United States is the Form 706, which has to be submitted to the Internal Revenue Services (IRS).