There is no estate tax in West Virginia, but residents of the state may still have to pay the federal estate tax if the value of their estate is high enough. In this guide, Mountain State residents will find the information they need to prepare for the estate tax and make sure their families are ready for the legal and financial hurdles that will arise when they die. You don’t have to plan your estate by yourself, though. A financial advisor can help you work through all of the problems and come up with a workable plan. You can find an advisor with SmartAsset’s free financial advisor matching service.
West Virginia Estate Tax
West Virginia is one of the 38 states in the nation without an estate tax.
What Is the Estate Tax?
Some states (and the federal government) levy the estate tax on the estates of people who have recently died. The estate tax is applied before the assets in the estate are passed on to an individual’s designated heirs. Some people refer to the estate tax as the “death tax.” It only applies to estates that are worth a certain legally determined amount.
Don’t confuse the estate tax with the inheritance tax, which is levied on money that has already passed to heirs. Whereas an individual’s estate is responsible for the estate tax, beneficiaries must pay the inheritance tax.
West Virginia Inheritance and Gift Tax
There is no inheritance tax in West Virginia. However, you could owe inheritance tax in a different state if someone living there leaves you property or assets. Pennsylvania, for instance, has an inheritance tax that applies to any assets left by someone living in the state, even if the inheritor lives out of state. If you inherit assets or property from someone who lived in another state, check the local laws so you don’t end up missing a tax bill you were supposed to pay.
There is no gift tax in West Virginia either. The federal gift tax exemption is $16,000 per recipient per year in 2021, going up to $16,000 in 2022. If you give any one person more than $16,000 in a year, you must report that gift to the IRS. It will counts against your lifetime gift tax exemption of $12.06 million and also lower your federal estate tax exemption.
Federal Estate Tax
West Virginia won’t tax your estate, but the federal government may if your estate has sufficient assets. The federal estate tax exemption is $11.70 million for 2021 and will increase to $12.06 million for deaths in 2022. The exemption is portable, meaning that one spouse can pass their exemption to the other. A couple can protect a total of $24.06 million from their estate when both of them die, with the right legal maneuvers.
Estates exceeding the federal exemption are subject to a progressive tax with ascending rates. The top rate is 40%.
Here is an example: Let’s say an estate is worth $17.06 million. Taking into account the $12.06 million exemption, the taxable estate is $5 million, putting this estate in the top tax bracket. The base payment on the first $1 million is $345,800, and 40% is owed on the remaining $4 million. That comes to $1.60 million. Add in the $345,800 base payment, and the total estate tax payment owed on this estate is $1,945,800.
|FEDERAL ESTATE TAX RATES|
|Taxable Estate*||Base Taxes Paid||Marginal Rate||Rate Threshold**|
|$1 – $10,000||$0||18%||$1|
|$10,000 – $20,000||$1,800||20%||$10,000|
|$20,000 – $40,000||$3,800||22%||$20,000|
|$40,000 – $60,000||$8,200||24%||$40,000|
|$60,000 – $80,000||$13,000||26%||$60,000|
|$80,000 – $100,000||$18,200||28%||$80,000|
|$100,000 – $150,000||$23,800||30%||$100,000|
|$150,000 – $250,000||$38,800||32%||$150,000|
|$250,000 – $500,000||$70,800||34%||$250,000|
|$500,000 – $750,000||$155,800||37%||$500,000|
|$750,000 – $1 million||$248,300||39%||$750,000|
|Over $1 million||$345,800||40%||$1 million|
*The taxable estate is the total above the federal exemption of $12.06 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall West Virginia Tax Picture
West Virginia is fairly tax-friendly for retirees. It partially taxes Social Security benefits, withdrawals from retirement accounts and income from public and private pensions. For tax year 2021, taxpayers can exclude 65% of their federally taxed Social Security benefits on their state tax return if their federal AGI is below $50,000 (single filers) or $100,000 (joint filers). As of 2022, all Social Security will be tax-exempt. Seniors in West Virginia can deduct up to $8,000 in other retirement income. West Virginia’s income tax rate ranges between 3% and 6.50%.
The average effective property tax rate in West Virginia is 0.57%, among the lowest in the country. That, combined with low home costs, makes property taxes comparatively very cheap. West Virginia has a homestead exemption of $20,000 of assessed value for any seniors age 65 and older who own and occupy their homes and have paid taxes on it for two years before applying for the exemption.
Statewide sales tax in West Virginia is 6%. Some cities also charge a local rate ranging from 0.50% to 1.00%. There are sales tax exemptions in the state for groceries and prescription drugs.
Estate Planning Tips
- It isn’t always easy to plan an estate. It takes time, patience and the ability to navigate a sometimes complicated set of rules and regulations. A financial advisor makes it easier, and SmartAsset can help you find one with our free financial advisor matching service. You just answer a few questions and we match you with up to three advisors in your area, all fully vetted and free of disclosures. You interview each advisor and see if one of them is a good match to help you get where you want to go financially.
- Knowing how much money you’re likely to have in retirement is a key part of estate planning. You can get a good estimate with SmartAsset’s free retirement calculator.
Photo credit: ©iStock.com/Jirapong Manustrong, ©iStock.com/Lady-Photo