Is there an inheritance tax in Texas?

Table of Contents

Do I Have To Pay An Inheritance Tax

Your Estate May Be Subject To The Federal State Tax

How To Calculate Federal Estate Tax

There is no inheritance tax in Texas. You may have to pay federal estate taxes, but not state inheritance taxes. Texas is one of a handful of states that does not have an inheritance tax.

While there is no state inheritance tax in Texas, your estate may be subject to the federal estate tax.

The federal estate tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them.

The total of all these assets is your “gross estate.”

The federal government imposes a tax on the transfer of your property at death. The amount of tax depends on the value of your gross estate.

As of 2022, the tax is imposed on estates valued at more than $12.06 million for an individual, or $24.12 million for a couple.

Estates worth less than this amount are not subject to the tax.

The estate tax rate is currently 40%. With a base payment of $345,800 on the first $1,000,000 of the estate.

So, for example;

if you have a gross estate of $15.56 million

$12.06 million will be void due to the federal tax exemption.

$15,560,000 - $12,060,000 = $3,500,000

This makes you are subject to pay taxes on the $3,500,000 estate.

The first $1,000,000 has a base tax of $345,800.

Then you are left with the 40% federal estate tax on the residuary estate of $2,500,000

40% of $2,500,000 = $1,000,000

$345,800 base payment

$1,000,000 + $345,800 = $1,345,800

If your estate is worth 15,560,000. You are subject to pay $1,345,800 in federal estate taxes.

Example 2:

Estate worth: $17,560,000.

$12,060,000 of the exemption is applied.

$17,560,000 - $12,060,000 = $5,500,000

$345,800 base payment on the first $1,000,000.

Subject to pay 40% on $4,500,000 = $2,200,000

$2,200,000 + $345,800 = $2,545,800

If your estate is worth 17,560,00. You are subject to pay $2,545,800 in federal estate taxes.

Your executor will file an estate tax return (Form 706) with the IRS and pay any taxes due. The return must be filed within nine months of your death, unless the IRS grants an extension.

Note that even if your estate is not required to file an estate tax return, it must still file a return to elect portability. Portability allows a surviving spouse to use the unused portion of the deceased spouse’s estate tax exemption.

For more information, see IRS Publication 559, Survivors, Executors, and Administrators.