Overview of Indiana Inheritance Tax Laws: 2013 Through 2022
Indiana Inheritance Taxes Then and Now
Indiana does not have an inheritance tax, at least not for deaths occurring after Dec. 31, 2012. A tax was previously assessed on the transfer of certain property owned by an Indiana resident to beneficiaries, but a law enacted in March 2012 resulted in the complete repeal of this tax.
The law additionally made retroactive changes to the exemption for deaths occurring on or after Jan. 1, 2012. The repeal was to be enacted by reducing the tax by 10% per year beginning in 2013 until it completely phased out for deaths occurring on or after Jan. 1, 2022.
That didn't end up happening. The state retroactively repealed the tax back to Jan. 1, 2013 as part of a budget signed by the governor in May 2013. Inheritances resulting from deaths occurring on Jan. 1, 2013 or later aren't taxed.
Estate Taxes vs. Inheritance Taxes
There are some distinct differences between an estate tax and an inheritance tax, although both have been collectively referred to as "death taxes."
An estate tax is charged against the value of the entire estate regardless of who its beneficiaries might be. An inheritance tax is charged only against the value of individual bequests.
The estate pays the estate tax, whereas beneficiaries are liable for paying the inheritance tax, although some estates will kindly pick up the tab for them.
Indiana doesn't impose a separate estate tax due to changes in the federal estate tax laws that phased out this state "pickup tax" effective Jan. 1, 2005.
Beneficiaries Who Are Subject to the Inheritance Tax
Estates that are still considered open for tax purposes and resulting from deaths prior to 2012 are subject to certain guidelines.
Each beneficiary of an Indiana estate receives an exemption from the tax based on their degree of kinship to the decedent. Only the values of gifts over these exemption amounts are taxed.
Surviving spouses and charities are entirely exempt from the tax. This is consistent with the laws of other states that collect an inheritance tax, all of which exempt property passing to a surviving spouse.
Class A beneficiaries include parents, children, stepchildren, grandparents, grandchildren, other lineal ancestors, lineal descendants, and spouses of children or stepchildren. Each Class A beneficiary is entitled to an exemption of $250,000.
Class B beneficiaries include brothers, sisters, and lineal descendants of brothers or sisters, which means nieces, nephews, and their descendants. Each Class B beneficiary is entitled to an exemption of $500.
Class C beneficiaries include everyone else, such as aunts, uncles, cousins, nieces, and nephews by marriage, friends, and corporations. Class C beneficiaries are only entitled to receive an exemption of $100.
The Indiana Inheritance Tax Rate
Class A beneficiaries are subject to inheritance tax rates that range from 1% to 10%. Class B rates increase to 7% to 15%, and Class C rates top out at 10% to 20%
Required Tax Forms and When They're Due
Form IH-6, the Indiana inheritance tax form, must be filed by beneficiaries of Indiana residents within nine months of the decedent's date of death. The tax must be paid within 12 months of the date of death. Otherwise, interest will begin to accrue from the date of death.
A 5% discount is granted if the inheritance tax is paid within nine months.
Beneficiaries of nonresidents who owned real estate or tangible personal property located in the state should file the Indiana Inheritance Tax Form for a Non-Resident Decedent, Form IH-12. This is also due within nine months of the decedent's date of death as well, and the tax must be paid within 12 months of the date of death or interest will begin to accrue.
A 5% discount is also applied to payments made within nine months, just as with inheritances received from resident decedents.
Where to File
Form IH-6 must be filed with the probate court of the Indiana county in which the decedent resided at the time of death, or with the probate court in which the decedent’s probate estate is being administered.
Form IH-12 must be filed with the probate court in which the decedent’s probate estate is being administered. The return should be filed in the county where the deceased non-resident owned real estate or tangible personal property only if a probate estate isn't being administered.
Indiana Inheritance Tax Payments
Inheritance tax payments for an Indiana resident's estate should be made to the county treasurer of the decedent’s county of residence.
Inheritance tax payments for nonresident estates are paid directly to the Inheritance Tax Section of the Indiana Department of State Revenue, 100 N. Senate Avenue, Room N248, Indianapolis, Indiana 46204-2253. Checks should be made payable to the Indiana Department of State Revenue.
Inheritance Tax Refunds
Beneficiaries who paid this tax when they didn't actually have to because of the law change are entitled to refunds. File Form IH-5, the Claim for Refund, with the Department of Revenue.
You can refer to the Indiana Department of Revenue website for more information about Indiana inheritance taxes.
The information contained in this article is not tax or legal advice and it's not a substitute for such advice. State and federal laws change frequently, and the information in this article might not reflect the most recent changes to the law. Please consult with an accountant or an attorney for current tax or legal advice.