Taxes cover a large amount of ground and that ranges from property tax to estate and inheritance tax. A lot of the terminology used regarding taxes can be confusing to understand as well.
When it comes to the different types of taxes, as well as what certain words mean, Americans can become easily confused. Luckily, all of these things can be easily explained and understood.
When it comes to property taxes, inheritance taxes, estate taxes, and other things, these topics are vastly different. At the end of the day, everything is handled by the IRS, but the way each thing is handled is very different.
Property tax and where people pay the most money
A new study examined where exactly in the United States people spend the most money when it comes to property taxes. According to Route Fifty, the amount could range anywhere from $200 per year to $10,000 per year. The report was released by the Tax Foundation, which is a think tank based out of Washington D.C. The foundation looked into the median range of property tax payments for counties, and then states.
Different factors will determine what your property tax may be, including the rate at which you’re taxed and the value of your property. This is why different areas have different amounts. One area may have very high valued homes that make the property tax much higher than areas where the home values just aren’t worth as much. These factors which determine the amount paid in property tax have a direct impact on the area and funding that goes back into the community.
The money residents pay in property taxes end up funding a lot of the things the local government runs. This includes schools, roads, and emergency services. Overall, the biggest discovery from this study is that the differences in property taxes between states and areas can be so drastically different.
Route Fifty looked at the data and found the three lowest property tax payments. In the Northwest Arctic Borough and the Kusilvak Census Area in Alaska, Avoyelles, East Carroll and Madison parishes in Louisiana, and Choctaw County in Alabama, all property tax payments fell below $200.
In Bergen, Essex, and Union counties in New Jersey, Nassau, Rockland and Westchester counties in New York, and Falls Church County in Virginia, the median property tax exceeded $10,000.
The report made it clear that people may not enjoy paying such high property taxes to their local government. Despite this, they’re the ones who benefit the most from it. They get to benefit from living in a good, wealthy school district, having good emergency services, and enjoying the things property taxes pay for.
How do inheritance and estate taxes work?
Many people have grown interested in inheritance and estate taxes because King Charles will inherit an entire kingdom. This will happen because he is the next in line for the throne. One of the more shocking aspects people have expressed confusion over, is why King Charles will not have to pay taxes on his inheritance.
The laws in the United Kingdom are obviously not the same as they are in the United States. As for King Charles, the laws in the U.K. are what apply to him and his inheritance and estate. According to Bloomberg Tax, there was an understanding reached in 1993 between the Royal Family and Inland Revenue. A memorandum cleared up any confusion in 2013. This memo stated that any assets owned by the monarchy wouldn’t be subject to inheritance tax. It also stated that some assets are private but have official use. This includes Balmoral.
The laws regarding other citizens in the U.K. are slightly different. They require taxpayers owning property to pay a 40% tax on assets exceeding £325,000. Any assets below that amount are exempt.
But what about the United States?
In the United States, there is an exclusion for inheritance and estate taxes. In 2022, the federal estate tax exemption was $12,060,000 per person or $24,120,000 per married couple.
Assets that you own and control like property, cash, bonds, stocks, etc. are subject to tax.
Most states do not have an inheritance tax that passes onto spouses or children who inherit property. Five states do, including Iowa, Kentucky, Nebraska, New Jersey, and Pennsylvania.
For estate taxes, eleven states currently impose a tax. This includes Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington.