North Carolina does not have an inheritance tax. Moreover, the state also does not levy the estate tax that is applied to the property of the recently deceased before transferring it to heirs.
However, there are still cases when a resident of North Carolina may be responsible for paying significant tax due, inheriting property within or outside of the state.
In this article, we shall talk about how local and federal taxes may influence estate planning and the inheritance procedure for residents of North Carolina.
When does a North Carolina resident pay the “death taxes”?
Technically, North Carolina residents don’t pay the inheritance tax or estate tax when they inherit an estate within the state. However, there are 2 important exceptions to this rule:
- If the estate exceeds the federal estate exemption limit of $12,06 million, it becomes a subject for the federal estate tax with a progressive rate of up to 40%;
- If a North Carolina resident inherits a property from a state that has an inheritance tax, they become responsible for paying it. Moreover, Maryland has both inheritance and estate taxes.
It is important to remember that estate is a collective sum of a person’s worth. It includes real estate, stocks, savings all kinds of property and possessions. That is why planning your estate, it is essential to address a qualified professional who will estimate the entire estate’s worth, its taxable part, and suggest steps that will help to ease the tax burden for your heirs.
Inheritance and lifetime gifting in North Carolina.
North Carolina also does not levy a gift tax. It allows the state’s residents to easily and legally reduce the taxable part of their estate and preserve it for their heirs.
However, there is still the federal gift tax. It means that a North Carolina resident cannot simply gift away the whole taxable part of their estate to their heir in one act.
The federal gift tax has an annual exemption of $16,000 per recipient. In other words, you can make up to $16,000-worth gifts to as many people as you wish every year. A married couple can gift away up to $32,000 to each heir without having to file the tax return form or affecting their lifetime exemption.
From this point, gifts are not just a way to share your wealth with your beloved ones but a means of estate planning that allows you to reduce the taxable part of your estate and its fiscal burden.