Your loved one’s estate may not be subject to federal estate tax, but there may still be several different types of taxes to navigate. Here are a few examples of tax considerations you might need to think about as you work to settle your loved one’s estate.
The executor of the estate may need to file a final tax return on the decedent's behalf. If your loved one worked with a tax advisor, they may be able to assist. As you’re filing the final tax return, remember to claim all eligible credits and deductions, for example medical bills.
The executor will also want to make sure all prior year tax returns have been filed.1
The estate may incur taxes after your loved one’s passing, while the estate is in probate. The executor is responsible for applying for a tax identification number (TIN) or employer identification number (EIN) for the estate.
If the estate generates more than $600 in annual gross income, Form 1041, US Income Tax Return for Estates and Trusts should be filed with the IRS.2 Consulting with a tax advisor is always a good idea.
For smaller estates or those with assets that may not pass through probate, this may not be a concern.
Federal estate tax is also known as the “death tax” and is imposed on the total value of the decedent’s assets. It’s based on the current fair market value of the assets, not the original value when they were purchased. In 2023, the tax generally only applies to assets over $12.92 million.3
Many states have been phasing out state-level estate and inheritance taxes. As of 2023, 17 states and the District of Columbia impose either an estate tax, an inheritance tax, or both.4 See if your state is included.