Ask the Editor: Questions on Property Taxes
Each week in our Ask the Tax Editor sequence, Joy Taylor, The Kiplinger Tax Letter editor, solutions questions on matters submitted by readers. This week, she’s taking a look at 4 tax questions from readers on federal and state property taxes. (Get a free issue of The Kiplinger Tax Letter or subscribe.)
1. What’s the lifetime federal property and present tax exemption?
Question: What is the lifetime federal property and present tax exemption for individuals who die this yr? Will or not it’s completely different for 2027 deaths?
Joy Taylor: The lifetime federal estate and gift tax exemption for individuals who die in 2026 is $15 million. This quantity will go up every year with annual inflation. We do not but know the determine for 2027 deaths.
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2. How many estates pay federal property tax?
Question: I’m curious what number of estates really pay property tax, now that there’s such a excessive lifetime federal property and present tax exemption.
Joy Taylor: In latest years, about 7,000 Form 706 property tax returns have been filed with the IRS every year. More than half of those filings are from taxable estates of decedents, that means estates that owe the federal property tax.
The nonpartisan Tax Policy Center just lately estimated that 6,890 federal property tax returns can be filed for decedents dying in 2026, with 3,900 filed by taxable estates and a couple of,990 filed by estates that owe no tax.
3. Will the IRS tax me on inherited property?
Question: My grandmother just lately died, and I inherited an appreciated, precious piece of actual property that she owned. Will the IRS tax me on my inheritance?
Joy Taylor: No. Inheritances are typically tax-free for federal tax functions. And you’d typically take a stepped-up tax foundation within the inherited property equal to truthful market worth on the time of your grandmother’s dying. So for those who promote the property shortly after her dying, you should not acknowledge a lot taxable acquire from the sale.
4. Which states have their very own property, inheritance taxes?
Question: Which states have their very own property or inheritance taxes?
Joy Taylor: Most states don’t impose taxes upon dying. However, some do. Washington, D.C., and 12 states levy their very own property taxes on decedents. These states are Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington.
The property tax exemption quantities within the 13 locales range broadly from state to state, and most are far beneath the federal exemption. Only Connecticut has hiked its property tax exemption quantity to shut to the present federal degree.
Five states impose an inheritance tax. They are Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania.
For extra data, see our article on states with scary estate and inheritance taxes.
About Ask the Editor, Tax Edition
Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions on tax matters. You’ll discover full particulars of submit questions in every publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.
We have already obtained many questions from readers on matters associated to tax adjustments within the One Big Beautiful Bill, retirement accounts and extra. We will proceed to reply these in future Ask the Editor roundups. So maintain these questions coming!
Not all questions submitted can be printed, and a few could also be condensed and/or mixed with different comparable questions and solutions, as required editorially. The solutions offered by our editors and consultants, on this Q&A sequence, are for normal informational functions solely. While we take affordable precautions to make sure we offer correct solutions to your questions, this data doesn’t, and isn’t meant to, represent unbiased monetary, authorized, or tax recommendation. You mustn’t act, or chorus from performing, primarily based on any data offered on this characteristic. You ought to seek the advice of with a monetary or tax advisor relating to any questions you could have in relation to the issues mentioned on this article.
