Iowa Inheritance Tax

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What Is Iowa's Inheritance Tax

Iowa collects an inheritance tax for property inherited, but the tax rate is dependent on how closely related the beneficiary is to the decedent. Moreover, Iowa has exemptions to the inheritance tax.

Exemption from Taxation

Inheritance tax is not collected if the decedent’s estate is $25,000 or less.

If the decedent’s estate is over $25,000, the tax will not apply to the following beneficiaries:

How the Tax Amount Is Determined

The tax amount is dependent on how closely the decedent’s ties are to the state of Iowa. If the decedent is a resident, then his entire estate will be taxed minus certain estate liabilities. But if the decedent is a nonresident, only real and tangible property owned in Iowa will be taxed.

For residents, the following liabilities may be deducted:
The liabilities are divided amongst the beneficiaries. A tax rate will be assessed based on the familial relationship between the beneficiary and the decedent. The closer blood relationship is, the lower the tax rate. The inheritance tax rate in Iowa starts at 5 percent and can be as high as 15 percent.

Filing Inheritance Tax Return

The executor of the decedent’s estate is responsible for filing one single tax return. If no such tax return is filed, then the estate will not be distributed. The Iowa Probate Court requires copies of the inheritance tax return prior to any distribution action.

The executor has nine months from the date of death to file the tax return, and nine months thereafter to pay. If no tax return is filed, an extension may be filed and a penalty must be paid. Interest will be accrued for any tax owed.

Consulting An Attorney

Please consult an estate attorney if you want to reduce your estate tax liabilities or if you need to file an extension for probate purposes. 

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Last Modified: 06-08-2015 06:42 PM PDT

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