It’s said that nothing can be certain except death and taxes. Sometimes, the two coincide. After a person dies, their estate may be subject to taxes. However, despite the common saying, death taxes are not always certain. Whether or not an estate is subject to taxes will depend on a few things, including the value of the estate and the location. Here’s what you need to know about estate taxes in Oregon.
The Difference Between Estate and Inheritance Taxes
Before going any further, it’s important to clear up some terminology.
The terms “estate tax” and “inheritance tax” are sometimes used interchangeably to refer to any type of “death tax,” but there are some technical differences between the two types of tax. Both can apply when a person dies and their assets are distributed to heirs. However, estate taxes are typically paid by the estate before assets are distributed. Inheritances taxes are typically paid by the beneficiaries of the estate after they receive the assets.
Federal and State Estate/Inheritance Taxes
There is a federal estate tax, but not everyone pays it. According to the IRS, an estate tax filing is required for estates with combined gross assets and prior taxable gifts exceeding $11,700,000 in 2021. In 2022, the threshold will increase to $12,060,000. Most estates do not meet this threshold, so most estates are not subject to the federal estate tax.
Before you celebrate your escape from Uncle Sam, however, you need to consider whether you’ll owe any state inheritance or estate taxes.
It’s a little like income tax. Different states charge different rates, and some don’t charge anything at all. According to Investopedia, estate taxes are levied in Connecticut, District of Columbia, Hawaii, Illinois, Maine, Massachusetts, Maryland, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington, while inheritance taxes are levied in Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. And yes, you read that right – Maryland is the only state to levy both estate and inheritances taxes.
The Oregon Estate Tax
If you live in Oregon, you can be happy that you don’t have to pay both an estate tax and inheritance tax like people in Maryland. On the other hand, you may owe an estate tax, and the threshold of $1 million is relatively low.
According to the Oregon Department of Revenue, the tax is called the Oregon Estate Transfer Tax. Here are a few more key takeaways from the Oregon Department of Revenue website:
- The estate tax applies if the total value of all assets comes to at least $1 million or more.
- An estate may be subject to the estate tax even if the decedent was not a resident of Oregon. This is because the estate tax can be applied when an estate contains any property that is taxable by Oregon or if the decedent had real property or tangible personal property located in Oregon.
- You will be responsible for filing if you are the personal representative, executor, administrator, fiduciary, custodian of estate assets, or person who has actual or constructive possession of estate assets.
- The tax return and payment become due nine months after the estate owner’s date of death.
Will Taxes Take a Bite out of Your Estate?
If you own real estate, retirement accounts and other valuable assets, you might be closer to the $1 million Oregon threshold than you realize.
Tax law can be very complicated, and the average person does not have experience navigating estate tax laws. An attorney who specializes in estate planning and tax law can help you minimize the impact of taxes on your estate. Contact Ginger Skinner for guidance.