Governor Signs the Inheritance Tax Phase-Out Act

Published:

by Marie Jett, CPA | Manager, Tax Services Group

On March 20, 2012, the Governor signed into law Senate Enrolled Act 293 that changes the exemption amounts and eventually calls for the phase-out of the Indiana Inheritance Tax. Prior to January 2012, the Indiana Inheritance Tax was calculated based on different classes of exemptions and tax rates associated with those classes. Beginning in January 2012, the amount of the exemption increases from $100,000 to $250,000 for the class that includes children, grandchildren, parents and grandparents.

Beginning in 2013, the inheritance tax will begin to be phased out. The phase-out is a credit that is applied to the inheritance tax. The credit begins at 10% in 2013 and increases 10% each year over the next 9 years. The Indiana Inheritance Tax will be completely eliminated on January 1, 2022.

The Governor also signed a bill that enhances the Automatic Taxpayer Refund that was established last year. The enhancements affect the calculation of the refund amount for taxpayers. To receive the refund, the taxpayer must have filed a resident Indiana income tax return in the previous year. If there is an Automatic Taxpayer Refund allowed, taxpayers could receive a minimal refund as early as next spring when they file their 2012 income tax returns.