Oklahoma does not have an inheritance tax. However, there are several cases when an Oklahoma resident may become responsible for paying a certain tax due when it comes to inheritance.
In this article, we shall talk about the specifics of inheritance taxation for Oklahoma residents, the difference between state and federal taxes, and how to reduce the taxable part of your estate to preserve it for the heirs.
Do Oklahoma residents have to pay an inheritance tax?
The fact that Oklahoma does not have an inheritance tax means that the state`s resident does not have to pay any taxes when they inherit an estate located in the state that does not exceed the lifetime exemption of $12,06 million.
Iowa, Kentucky, Nebraska, New Jersey, and Pennsylvania are the states that do have the local inheritance tax. It means that those who inherit the estate in those states will be responsible for the inheritance tax due even if they are Oklahoma residents.
Moreover, Maryland has both inheritance and estate taxes. The estate tax applies to the property of a deceased person before it is transferred to the heirs.
Therefore, once an Oklahoma resident has or may inherit estate located in one of those states, it is essential to take estate planning seriously and address for professional assistance before the state tax laws become a severe tax burden on their welfare.
The federal estate and gift taxes
The federal estate tax applies to the estate that exceeds the lifetime exemption of $12,06 million. The exception is a portable matter, which means that the federal estate tax exemption for a legally married couple is $24,12 million.
Suppose you have a sufficient estate that exceeds the lifetime exemption bar. The taxable part of your estate may be subject to up to a 40% federal estate tax rate. However, with a proper approach to estate planning, you can easily reduce that taxable part.
Oklahoma has no gift tax. The federal gift tax, at the same time, has an exclusion of $16,000 per recipient per year. It means that an Oklahoma resident can make as many $16,000-worth gifts to as many people they wish every year. It is a straightforward and perfectly legal way to reduce the taxable part of your estate.
Moreover, the following gifts don’t require filing up a tax return file or paying a federal gift tax:
- Donations to IRS-approved charities;
- Gifts between spouses who are both US citizens;
- Payments made to cover someone`s medical or academic expenses as long as they go directly to the institution or service provider.
Considering the lifetime exemption of $12,06 million per person and a thoughtful approach to estate planning that considers federal and local tax laws of Oklahoma, a married couple can collectively protect up to $24,16 million-worth estate for their heirs.
Whether you want to start the estate planning process or need to learn more about inheritance tax laws in Oklahoma and other states, make sure to address a qualified professional to be fully prepared and avoid adverse fiscal side effects for you and your heirs.
If you’re planning on leaving something to your loved ones, avoiding the Oklahoma estate tax can help protect your wealth. A tax attorney can help you determine if your assets qualify for exemption. In some cases, Oklahoma estate taxes will be as high as 40%. Even if you have no debts, it’s important to make sure your estate is fully covered by taxes. The following article will provide you with more information on how to avoid the state’s estate tax.
The estate tax in Oklahoma is set by law. The law is passed by the Oklahoma legislature. While state legislatures have the power to collect the tax, the federal government has taken this power as well. Regardless of how your heirs die, the state can’t levy an estate tax until you die. Therefore, it’s important to have a valid will before the death of a loved one.
While Oklahoma does not levy an estate tax, many residents of the Sooner State do. The size of your estate can be impacted by this tax. An advisor can help you understand the state’s laws and how you can minimize your estate tax burden.