Understanding Tax Accounting on Estates
Many of us have a tendency to get confused when we have to calculate the taxes we owe to the IRS. Although confusion is normal, we cannot afford to allow our ignorance to land us into any trouble with the IRS. The right option would be to learn more about taxes – I agree that it is a very vast topic – but we can at least learn more about those tax issues that affect us directly. The following information will guide you handling the affairs of your estate in a much better manner:
- Whenever someone wants to transfer their property to someone else, after their death, then the IRS taxes them for it – this tax is known as Estate Tax. All property owned by the person deceased will be considered – that includes insurance, cash, securities, assets and all business interests. The value of all property, at the time of their death, must be calculated. The cost at the time of purchase may not be considered.
- The value of the Estate is known as gross Estate amount. A number of deductions are then made from the gross Estate amount. Once this is done, the taxable estate amount is calculated. Some of the deductions that can be taken in consideration are debts, mortgages, expenses that have been incurred for maintaining the estate and any property that needs to be passed to the surviving partners or any charity that has been approved in advance.
- At this time Estate Tax is applies to approximately 2% of the US population. Filing is not needed when the total gross value of the estate and prior taxable gifts is below $3,500,000, if date of death was after January 1, 2009.
- Anyone owning property may also have to pay a number of local taxes that would be applicable depending on where his or her property would be located. Such taxes keep on changing, so it is very important to understand what taxes are due so you don’t encounter any problems in the near future. The local taxes will be calculated based on the assessed value of the property.
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