If you’ve had a family member or loved one who recently passed away, calculating the taxes on their estate may be low on your priority list. This can be an emotional and stressful time. But how the government will tax your loved one’s assets may affect inheritances, charitable donations, and other estate plans.
An estate tax is levied by the federal or state government on the estate of a person who has recently passed away. It’s sometimes referred to as the death tax. Estate tax is imposed on a person’s estate or inheritance; it’s applied before the people who are to inherit money receive and funds.
Georgia is one of the states that does not have an estate tax. However, an estate may still owe a federal estate tax if the total market value of the estate is worth $11.7 million or more ($12.06 million in the 2022 tax year). This would include all of the estate’s assets, such as cash, real estate, and investments. An estate that falls below $11.7 million is exempt from federal estate tax.
Gift tax is a federal tax on transfers of money or property to other people; in this exchange, the gift-giver does not receive anything of value in return. Georgia does not have a gift tax; however, an estate may owe federal gift tax if the gift-giver gave away more than $15,000 per person, per year. (In 2022, the federal gift tax exemption will increase to $16,000 per person, per year). Gift tax may also apply if the gift-giver gave away more than $11.7 million in their lifetime (the exemption increases to $12.06 million in 2022). It’s important to note that gifts between spouses are unlimited and do not typically trigger a gift tax. Also, gifts to nonprofit organizations are categorized as charitable donations and not gifts.
Generation-Skipping Transfer Tax
Generation-skipping transfer tax (GST) applies to gifts of $11.7 million or more to a grandchild, great-grandchild, or a person who is 37-years or older and not a relative. (This amount increases to $12.06 million for the 2022 tax year). For gifts that skip a generation or are outside the annual exclusion amount, the generation-skipping transfer tax applies the highest federal estate tax rate.
Income tax is a type of tax that the federal and state government imposes on a person’s income. Taxpayers must file an income tax return each year, based upon their income from businesses or other individuals. After a person passes away, their estate must file a final income tax return. This final return must include any income earned after the person’s death that year, such as interest or appreciation. The current standard deduction (the amount every taxpayer is allowed to deduct from their income to reduce their taxable income) is $12,550 for individuals or married couples filing separately. That amount will increase to $12,950 for the 2022 tax year.
Have Additional Questions? Contact Brian M. Douglas & Associates
If you have any questions about these taxes or how they may impact your estate plan, please reach out to us at (770) 933-9009 or via our online contact form. We’re always happy to help. Tax laws, filing deadlines, and exemption amounts may change at any time, so it’s a good idea to discuss your situation with an experienced estate planning attorney.