Georgia: No State Estate or Inheritance Tax
Georgia residents do not need to worry about a state estate or inheritance tax, which is a tax that is levied on people who either own property in the state where they died (estate tax) or inherit property from a resident of a state (inheritance).
Currently, six states levy an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvannia. There are fifteen states (plus the District of Columbia) that levy an estate tax: Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Tennessee, Vermont, Washington, and the District of Columbia.
Even though Georgia does not collect an inheritance tax, if you live in Georgia and inherit property from someone who lives in one of those six states that does levy an inheritance tax, you may get a tax bill for the property that you inherited from the person who lived in that state. You won't be taxed if you are married to the deceased, and some states exempt small inheritances. But it's still a tax bill that you'll have to pay and that you might not have been expecting.
The only 'death tax' that Georgia residents need to worry about is the federal estate tax, and that tax falls on the estate of the person who died, not on the people who inherit that property. There is an exemption of $5 million, which is indexed to inflation and is currently , and only people who die with an estate larger than that exemption will have to pay estate tax. It is estimated that only the richest .14% of Americans will be subject to the estate tax at all, or only two out of every 1,000 people who die.
If someone dies in Georgia with less than the exemption amount, their estate doesn't owe any federal estate tax, and there is no Georgia inheritance tax. The heirs and beneficiaries inherit the property free of tax, and don't pay income tax on it, either, because inherited property is not ordinary income. The only exception to this are inherited retirement accounts, which are subject to income tax as the assets are withdrawn. [Link to article about inheriting an IRA.]
You may also be interested in:
There are several different taxes that need to be filed after there's been a death. Learn more about which taxes to file and how to file them.
Each state has its own rules about probate. Find out how they do it in Georgia.
When beneficiaries inherit assets, those assets generally receive what's called a "step up"in basis. Understand how this saves beneficiaries taxes on appreciated assets.