DOES TEXAS HAVE ITS OWN ESTATE TAX?
Aug. 20, 2020
A total of 12 states plus the District of Columbia have their own estate tax laws, according to the Tax Policy Center. However, Texas is not one of them. Additionally, Texas does not have its own inheritance tax, either – only six states do.
Although Texas residents may not need to pay state-specific taxes, they may still be subject to the federal estate tax.
Federal Tax Limits for 2019
Texas residents with significant wealth should keep track of the estate tax limitations. According to Forbes, the estate tax exemption for individuals is $11.4 million and $22.8 million for married couples. This means individuals and couples can leave these amounts to their heirs without paying any federal estate taxes. The number of estates that are subject to these taxes is much lower due to the new tax cuts.
Planning Around the Estate Tax with Gifts
Those who are over or close to the estate tax threshold may utilize wealth transfer methods in order to leave as much money and property to their heirs as possible, instead of letting it go to the government. One strategy is to give lifetime gifts. In 2019, the annual exclusion for gifts is $15,000. This means individuals and couples can give $15,000 to as many people as they want each year. Married couples can each make gifts. This is a quick way to whittle down the value of estates. For example, a wife and husband can make $15,000 gifts to their two grandchildren, adding up to a total of $60,000. Not only do people find that giving gifts helps to avoid estate taxes, but it also comes with the gratification of passing on wealth before passing away.