As Indiana lawmakers increasingly hear calls to end Indiana’s inheritance tax, Hoosiers – most of whom never pay the tax – should know how it works.

Some essentials:

•Unlike estate taxes, Indiana’s tax applies not to the value of the estate but to the amount of inheritance each beneficiary receives.

•Spouses owe no inheritance tax. For direct descendants and ancestors – including children, stepchildren, grandchildren, parents and grandparents – the first $100,000 is exempt. After that, the rate is 1 percent to 10 percent. For example, an inheritance of between $300,000 and $500,000 is taxed at 5 percent; the top rate of 10 percent kicks in at $1.5 million.

•Other beneficiaries pay more. Brothers, sisters, nieces and nephews get only a $500 exemption, and pay rates of 7 percent to 15 percent. Others are entitled to just a $100 exemption and face rates of 10 to 20 percent.

•Any life insurance proceeds going to descendants are not taxable, but proceeds going to the estate are.

•The inheritance tax is not a major source of revenue for the state. The tax brings in about $150 million a year – slightly more than 1 percent of the overall budget.

Still, that represents $150 million that would have to be made up with other revenue or, less likely, budget cuts.

Opponents of the tax argue that few other states have inheritance taxes, and Indiana’s tax gives aging business owners planning their estates an incentive to move their businesses to other states. Advocates point out that few direct descendants must pay the tax, and the rate is modest for those who do.

Expect to hear more in this session of the General Assembly.