Dealing with the loss of a loved one is never easy. This goes for both aging parents and grandparents who have lived long and full lives, as well as those who are taken from us suddenly and without notice. The loss is still the same, and we all must find ways to hold on to their memory. Sometimes when a loved one dies, you may receive a gift of inheritance which can both be a way to remember the deceased and for their legacy to live on.
However, many heirs have questions and concerns about their inheritance like, “Does Ohio have inheritance tax?” and “Is my inheritance taxable?” These are essential questions to answer, and it’s always a good idea to work with an estate planning attorney to ensure you’re staying on the right side of the law and getting the inheritance that’s rightfully yours. If you’re in the Westerville, Ohio, area, including Worthington, New Albany, Delaware County, and Franklin County, call The Law Office of David G. Bale.
What Is an Inheritance Tax?
An inheritance tax is any tax that’s levied at the state level on money or assets that are left to heirs from a deceased individual. This is a tax on the total value of the inherited assets that falls on the inheritor (the beneficiary) to pay instead of the estate.
Inheritance Tax vs. Estate Tax
There’s also a good deal of confusion about an inheritance tax versus an estate tax and what the difference between the two is. Though the two are both taxes on property and assets that are transferred after the estate owner has passed away, there is one key difference:
- An inheritance tax must be paid by the recipient of the property or assets.
- An estate tax must be paid by the estate it self and is not the responsibility of the beneficiary.
It’s worth stating, however, that there is no Ohio estate tax at the moment.
Will I Have to Pay Inheritance Tax in Ohio?
Inheritance taxes can be a complicated issue for both those who are trying to leave behind assets to their loved ones in their estate plan as well as those who have recently inherited assets or are about to inherit assets. Naturally, both parties want to be aware of any tax implications that they or their heirs will have to deal with.
Currently, only six states in the country have an inheritance tax, and these are Nebraska, Iowa, Kentucky, Maryland, Pennsylvania, and New Jersey. Additionally, there is no federal inheritance tax, only a federal estate tax. Because Ohio doesn’t have an inheritance tax or an estate tax, many beneficiaries won’t have to worry about paying either of these. However, there still may be some situations where an inheritance could affect you.
What if I inherited property from a non-Ohio resident?
This is one of the few instances where you may owe inheritance tax even if you yourself are an Ohio resident. Say, for example, that your grandmother lived in Maryland at the time of her death while you were living in Ohio, and she left you a large portion of her estate. Since Maryland is one of the six states with an inheritance tax, you would be required to pay this under state law. However, if the roles were reversed and you lived in Maryland while your grandmother lived in Ohio, you would not have to pay the tax since only the laws of the state the deceased lived in must be followed.
Other Taxes to Consider as a Beneficiary
Just because you may not have to worry about an inheritance tax doesn’t mean that you’ll automatically get 100% of your inheritance. There are other taxes that you may have to pay:
- Federal Estate Taxes: Even though most states don’t have their own estate tax, there still is a federal estate tax, though it only applies to high-value estates. In 2023, the federal estate tax is only levied on estates larger than $12.92 million, meaning most people won’t have to pay it.
- Capital Gains Taxes: You may also have to deal with capital gains taxes, but these only apply to assets you receive as an heir (as opposed to money) and only when you sell these assets. For example, if you receive a large property from your aunt, you will not have to pay any capital gains (based on the appreciation of the asset) unless you decide to sell it.
What If I Sell the Home I Inherited?
As stated above, when you sell off assets that you inherit, these will likely be subject to capital gains taxes. This only happens if you first inherit and keep the asset (in this case a home), and then later sell it off for profit. If the home is sold by the estate before you get it and you then inherit the value of the home, this money is not subject to capital gains taxes.
Lean on Knowledgeable Legal Assistance
Inheritance taxes can be quite complicated, especially if the estate you’ve been given is of a high value. If you’ve recently inherited property or are about to, reach out to The Law Office of David G. Bale in Westerville, Ohio, for legal assistance.