West Virginia Inheritance Tax: Everything you need to know about

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Paul Sundin, CPA

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Inheritance tax is one of the most confusing matters. People may become responsible for paying a sufficient tax due even if they live in a state like West Virginia that does not actually have an inheritance tax at all.

In this article, we shall talk about the peculiarities of Inheritance taxation for the West Virginia resident and provide some estate planning tips to help you legally ease the tax burden of your property.

Does West Virginia have an inheritance tax?

As we have already mentioned, technically, the residents of West Virginia are not responsible for paying a tax due. The Economic Growth and Tax Relief Reconciliation Act of 2001 has also eliminated the estate tax in West Virginia.

However, there are certain cases when West Virginia residents may find themselves responsible for federal taxation that can reach as much as 40% of the inherited estate.

Technically, it can happen in two cases:

  • When a West Virginia resident inherits the real estate, personal or other property, or intangible assets like financial accounts or cash from a resident of the state that does have inheritance taxes;
  • When the inherited assets exceed your lifetime exemption of $12,06 million.

In the letter case, the inheritance becomes subject to federal estate taxation with a progressive scale that varies from 18% to 40%.

This fact often becomes an unpleasant surprise for heirs. However, with proper estate planning, it is pretty easy to reduce and preserve your taxable estate.

Gift tax and inheritance tax in West Virginia

There is no gift tax in West Virginia, and this fact became an essential part of the estate planning strategy for people with properties that exceed the federal estate tax exemption and therefore become subject to the federal estate tax.

Suppose you have an estate worth $13 million. It exceeds the 2022 federal estate tax exemption bar of $12,06 million by $940,000, which becomes taxable.

The absence of gift tax in West Virginia allows you to start gifting your property away to your heirs, reducing the taxable part.

However, it is still important to remember about the federal gift tax. It means that a West Virginia resident cannot simply gift away all the $940,000 at once. The federal gift tax exclusion has a limit of $16,000 per year per recipient.

It means that you can make gifts worth up to $16,000 to as many people as possible without reporting them to IRS and affecting the federal estate tax exemption.

Making such annual gifts, you will easily and legally reduce the taxable part of your estate and ease the federal fiscal burden of the inheritance. 

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