Difference Between Death Tax & Inheritance Tax

The Death of a Person Has Tax Consequences

While "death taxes" is an umbrella term used to describe taxes imposed on various kinds of property or transfer of property after a death, "inheritance taxes" are those imposed at the state level on the privilege of receiving property from a decedent at death.

Scope of Discussion

The following information pertains only to United States tax law as found in the Internal Revenue Code (IRC) enacted by Congress and found in Title 26 of the U.S. Code. States within the U.S. also have authority to tax individuals and estates.

Death Taxes

Death taxes include both estate taxes and inheritance taxes as levied by Federal and state taxing authorities.

Estate Taxes

According to the 6th edition of Black's Law Dictionary, estate tax is "imposed on the right to transfer property by death. Thus, an estate tax is levied on the decedent's estate and not on the individual heir receiving the property".

Inheritance Taxes

Imposed by some states, these taxes apply to the right of an individual or other entity to receive property upon the demise of another individual.

Current Status of Estate Tax

As of December 31, 2009, the Tax Reduction and Reform Act of 2007 expired, eliminating estate taxes in America. Unless Congress enacts new legislation during 2010, they will be reinstated on January 1, 2011.

References

• "Black's Law Dictionary", by Henry Campbell Black. West Publishing Company, 1990
• Estate Tax", by Internal Revenue Service, 2010

Resources

• IRS Form 706, U.S. Estate Tax Return