Inheritance issues inevitably raise some taxation issues as well. It’s important to gain at least a basic understanding of the taxes you’ll have to deal with.

Estate taxes are taxes which the estate itself pays before any assets are distributed to heirs. Texas has no state-wide estate tax, but federal estate taxes will still take a portion of your inheritance. The estate only has to pay federal estate taxes if it exceeds a certain threshold in value. For 2024, that value is $13,610,000.

Beneficiaries pay inheritance taxes after they receive their inheritances. There is absolutely no inheritance tax in Texas. You only have to worry about paying state inheritance taxes if your loved one lived in another state. 

There is no federal inheritance tax in the United States. Only six states collect them: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. If your loved one didn’t live in any of those states then, as of 2024, these aren’t issues you’ll have to worry about. 

There is one more type of taxes you should know about, and those are your capital gains taxes. Texas does not impose a capital gains tax, but the federal government does. A capital gains tax only applies when you earn profit by selling an asset.

Most of the time, you’ll run into a capital gains tax when you go to sell a piece of real estate that you inherited. It may have been purchased for far less than you sold it for. Some capital gains are taxed at 0%. The tax rate on most net capital gain never exceeds 20%. 

The tax will depend on what your taxable income is, and you can offset capital gains by reporting capital losses as well. 

As probate lawyers, we don’t deal with tax issues directly. We can only tell you what the current law is, and do so in general terms. 

We usually recommend going over your tax obligations with a qualified tax accountant. Nevertheless, it’s important to know that Texas taxes will not be a tripping point as you seek to navigate the probate process.

Want help with probate? Our experienced probate attorneys will guide you through the process, answer your questions, and help set your mind at ease by dispelling myths about the probate process. 

Get the peace of mind that comes with knowing the probate process has been handled correctly. Contact The Probate Law Group to get help today.