What is the Difference Between Estate Tax & Inheritance Tax in Maryland?
Estate taxes and inheritance taxes are collected separately. Estate tax is the tax paid on a decedent's entire estate. Inheritance tax is the tax paid on the money or property a person inherits from an estate. Maryland's Comptroller collects the taxes. If the inheritance tax paid is equal to or greater than the credit for state death taxes, no Maryland estate tax is due. Regardless, estate tax returns must be filed. As part of the filing, a certification by the Register of Wills of inheritance taxes paid must accompany the estate filing.
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Inheritance Tax
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Inheritance tax is the tax imposed on the value of all property that passes under a will, the interstate laws of succession, or under trust, joint ownership or otherwise, from a decedent to a beneficiary. The tax is calculated separately for each individual beneficiary. In Maryland, the inheritance tax is paid to the Register of Wills located in the county where the decedent lived or owned property. Maryland law provides for an exemption for inheritance taxes on property administered in an estate with a total value of $30,000 or less, or $50,000 or less if the surviving spouse is the sole heir.
Estate Tax
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The estate tax is a tax imposed on the transfer of property or money from an estate. The appointed representative of the estate or executor is required to file the estate tax return. Generally, estate taxes must be paid on any estate that is valued at $1 million or more.
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Inheritance Tax Rate
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According to the Maryland Comptroller's office, the inheritance tax rate is as follows: for decedents who died before July 1, 1999, the rate is 1 percent of the value of the property "passing to a child or other lineal descendant, spouse, parent or grandparent, and 10 percent on property passing to siblings or other individuals"; for decedents who died on or after July 1, 1999, the tax rate is 0.9 percent of the value of the property "passing to a child or other lineal descendant, spouse, parent or grandparent, 8 percent on property passing to siblings and 10 percent on property passing to other individuals"; and for decedents who died on or after July 1, 2000, the tax rate is "10 percent on property passing to nonfamilial individuals and exempt from taxes if it's passing to a child or other lineal descendant, spouse of a child or other lineal descendant, spouse, parent, grandparent, stepchild or stepparent, siblings or a corporation having only certain of these persons as stockholders."
Estate Tax Rate
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The estate tax rate is limited to 16 percent of the amount of the estate value that exceeds $1 million. This is the maximum credit permitted for state death taxes under the Internal Revenue Code. This is calculated by subtracting the inheritance tax paid to the Register of Wills from the allowable credit.
Due Dates
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Under Maryland law, the inheritance tax is due at the time the executor or representative accounts for the distribution of property. The Register of Wills determines when the inheritance tax is due and is permitted to extend the timeline for payment of inheritance tax for up to five years. An estate tax return must be filed within nine months of the death of the decedent.
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