Finding a solution to our state’s frustrating inheritance tax was a topic of concern during the past legislative session. Many people over the years have been impacted by this burdensome double tax and were searching for ways to eliminate it.
Legislation was passed through the General Assembly and was recently signed into law by Governor Daniels to address this growing concern. The new law will allow small business owners and farmers who have acquired savings and assets to be able to pass them on to their children or others without being taxed a second time.
The inheritance tax, or death tax as it is often called, was having a negative effect on small family businesses in Indiana. Families would work a lifetime to build their business and then be penalized if they wanted to pass it on to their children or siblings.
Indiana’s inheritance tax rate could range from one percent to as high as 20 percent of a person’s inheritance, 20 percent being the highest possible inheritance tax rate of any state.
Many of our surrounding states have already addressed this issue. Michigan and Ohio do not have inheritance taxes and Kentucky does not tax on transfers to children. We have tried for years to repeal the inheritance tax in Indiana and I am glad to see it finally set in motion.
The new law will increase the exemption in 2012 for Class A transferees, children and grandchildren to $250,000 then phase out the tax over a period of nine years, beginning in 2013. It phases out inheritance tax replacement amounts payable to counties over 10 years.
Every year, incremental reductions of approximately $14 million would be removed from the state’s inheritance tax revenue. The overall impact of this is estimated to keep as much as $165 million in the pockets of taxpayers each year.
It was important that we were able to address this issue because sometimes the inheritance tax is so large that the family businesses and farms would have to be sold. This will now help to alleviate the financial burdens on those who inherit the property and help keep businesses and farms in the family and in Indiana.
I have a farm in Huntington County, which I hope to pass on to my children someday, so I can directly and personally see the importance of this new state law. Families can be assured that their businesses and farms, which they worked so hard to develop, will remain in the family and not be at risk to be sold due to this bothersome, double tax.
Eliminating the inheritance tax will help many residing throughout Indiana and hopefully make our state a more attractive place to live, work and raise a family.