Inheritance Tax/Estate Tax

Iowa Inheritance tax

The state of Iowa has a “death tax” that is a tax based upon what someone inherits from a deceased individual. Under current law, there is a 100% exemption for inheritances by a spouse, charities, and lineal descendants and ascendants (children, grandchildren, parents, grandparents, etc.) Thus, any amounts that would pass to these exempt individuals or charities is free from any tax. Any other individual receiving an inheritance (siblings, nephew, friend, etc.) will be taxed on their inheritance which will be based upon the amount they receive and the relationship to the decedent. This tax would apply to any asset transferring as a result of a death, such as a named beneficiary, an IRA, or any other type of asset, except life insurance to a named individual.

Federal Estate tax

For deaths occurring in 2013, the federal estate tax exemption amount is $5.25 million. Under the federal estate tax system, any amounts that pass to the surviving spouse or to charities are fully exempt from federal estate taxation. For any other amounts, each person has an available exemption that can be used to pass amounts tax-free up to that exemption amount.