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Maryland and federal estate tax thresholds in 2022

On Behalf of | Jan 26, 2022 | Estate Administration & Probate |

Both residents and non-residents of Maryland may pay both state and federal taxes. People might also find themselves paying estate taxes to both the state and the IRS. How much the estate is worth and what beneficiaries receive factor into the amount owed.

Federal and state estate taxes

Tax laws may change from year to year, depending on whether legislatures and the chief executive decide. Congress could raise or lower taxes on the federal level, and the president may sign the supporting legislation. The legislature may do the same in Maryland, and the governor might sign the legislation. Of course, the law could remain unchanged, leaving the current law in place.

Positive news exists for beneficiaries who may inherit a substantial estate. The federal estate tax limit rises from $11.7 million to $12.06 million in 2022. In Maryland, the state estate tax limits remain at $5 million with no increase.

Probate and taxes

The executor must file all required tax returns during probate and pay any taxes due as part of the probate process. The executor must use estate funds to cover other obligations owed by the deceased.

Any amounts over the state and federal exemption cut-offs become subject to estate tax. Most estates fall well below the maximum threshold, and those estates won’t pay estate tax. Be mindful that individual and business tax returns might be necessary, as those obligations don’t go away when someone passes away. However, some estates might be insolvent, meaning they don’t have the funds to cover debts.