Menu ${}${SEMFirmNameAlt}${}${SEMFirmNameAlt}
Practice Areas
Let's Get Started!

Do estate taxes target money that was already taxed?

One common complaint about estate taxes is that they simply target money that was already taxed at least once, as income.

For instance, perhaps you are an only child and you have one surviving parent: your father. He earns money, pays taxes to the government when he earns it, and then puts it aside. When he passes away, here comes the government to tax it again just because it's passing to you.

This can happen. However, one thing to remember is that some of the taxation is simply because things have increased in value and were never taxed for that increase.

For example, perhaps your father bought the family home 50 years ago for $10,000. It's now worth $500,000, thanks to improvements in the area, increases in property value, and much more.

Yes, he paid property taxes that went up in correspondence with the value, but he didn't pay taxes on that raw increase. If you sold the home now, you'd be making $490,000 over the original purchase price.

The same principle can be used with businesses and other things that are simply worth more now than they used to be. This isn't income, per se, so it wasn't taxed as income that first time around. The estate taxes attempt to make up for that since you are now gaining significantly.

There are plenty of exemptions and limits on estate taxes. It's important to know how they work and what legal options and obligations you may have. Those who are passing assets to their children may want to consider the tax burden while doing their estate planning.

Source: Entrepreneur, "The 7 Most Common Estate-Planning Myths," accessed June 01, 2017

No Comments

Leave a comment
Comment Information

Serving businesses and individuals throughout Massachusetts

Waltham Office
375 Totten Pond Road
Suite 200
Waltham, MA 02451

Waltham Law Office Map

Braintree Office
25 Braintree Hill Office Park
Suite 406
Braintree, MA 02184

Phone: 617-523-1555
Braintree Law Office Map

Cranston Office
200 Midway Road
Suite 159
Cranston, RI 02920

Cranston Law Office Map

Hyannis Office
1330 Phinney’s Lane
Hyannis, MA 02601

Hyannis Law Office Map

Norwood Office
520 Providence Highway
Suite 10
Norwood, MA 02062

Norwood Law Office Map

Westborough Office
276 Turnpike Road
Suite 228
Westborough, MA 01581

Westborough Law Office Map

Woburn Office
444 Washington Street
Suite 203
Woburn, MA 01801

Woburn Law Office Map