An inheritance tax, sometimes called a "pick-up tax" or, incorrectly, an "estate tax," is a tax paid on a gift you received from someone who has died. Currently, under federal law, these taxes only take effect when an estate is worth more than $1.5 million.
Does California Currently Have an Inheritance Tax?
No. When the federal government enacted the Economic Growth and Tax Relief Reconciliation Act in 2001, many state’s inheritance taxes were phased out. Additionally, California requires a majority vote by its residents before enacting new legislation. Therefore, California has not directly taxed an inheritance since 2005. However, keep in mind that federal income tax law still applies.
- For those that died on or after January 1, 2005, there is no longer a requirement to file a California Estate Tax Return.
- For those that died after June 8, 1982, and before January 1, 2005, a California Estate Tax Return is required to be filed if a federal estate tax return is being filed with the Internal Revenue Service.
- For those that died on or prior to June 8, 1982, California will continue to collect the Inheritance Tax.
Where Is Inheritance Tax Collected?
Below is a list of states who still collect an inheritance tax:
- New Jersey
*As of May 8, 2013, Indiana signed into law an act that retroactively repealed their state inheritance tax.
How Can the Inheritance Tax of Another State Effect My Inheritance?
If a person who left you money lived in one of the above states during a period of time where an inheritance tax was valid, you may still owe tax on that gift.
Should I Seek Legal Help?
Estate Planning and Inheritance law is extremely complex and it only becomes more complicated as you add other areas of law, such as state and federal income tax. If you have a question regarding your tax liability, you should contact an experienced estate lawyer as soon as possible.