Most people will not be impacted by the federal estate tax, which only applies to taxable estates worth more than $12.92 million (or $25.84 million for married couples), per the 2023 IRS gift and estate tax exemption. Your estate is not subject to the federal estate tax if your estate’s value is less than the exemption amount.
Estate tax
Not every state has an estate tax. The twelve states plus D.C. that do have an estate tax, in alphabetical order, are below. Each has estate taxes with the following estate tax exemptions and tax rates (as of 2023):
- Connecticut $12.92 mm 12% flat
- District of Columbia $4.265 mm 11.2 – 16%
- Hawaii $5.49 mm 10 – 20%
- Illinois $4 mm 0.8 – 16%
- Maine $6.01 mm 8 – 12%
- Maryland $5 mm 0.8 – 16% (also has an inheritance tax)
- Massachusetts $1 mm 0.8 – 16%
- Minnesota $3 mm 13 – 16%
- New York $6.58 mm 3.06 – 16%
- Oregon $1 mm 10 – 16%
- Rhode Island $1.733 mm 0.8 – 16%
- Vermont $5 mm 16% flat
- Washington $2.193 mm 10 – 20%
Typically, the estate tax is applied to the taxable value of your estate over the state’s estate tax exemption amounts shown above. However, some states like New York have “estate tax cliffs” where if the value of your taxable state is more than 5% above the estate tax exemption amount, the estate tax applies to the entire estate.
The taxable value of an estate is typically the value of the gross estate less deductions, such as liabilities, mortgages, debts and assets going to a qualified charity or surviving spouse.
Some states impose an inheritance tax, where the beneficiary receiving money or property from the estate of a deceased person must pay a tax only on the assets received. This inheritance tax is calculated separately for each beneficiary.
Inheritance tax
Not every state has an inheritance tax. The six states that do have an inheritance tax, in alphabetical order, are below. Inheritance taxes, unlike estate taxes, typically do not have exemption amounts. Each has inheritance taxes with the following tax rates (as of 2023):
- Iowa 0 – 6%
- Kentucky 4 – 16%
- Maryland 10% flat (also has estate tax)
- Nebraska 0 – 15%
- New Jersey 0 – 16%
- Pennsylvania 0 – 15%
Note: Each state may have subtle but critical nuances beyond the scope of this article. Please consult an estate tax professional to verify what applies to your specific situation. Laws are subject to change.
Source: PlanEasy research, Tax Foundation, Kiplinger