Estate Taxes Across the U.S.
It is human nature to feel that we are overtaxed. And yes, rates for one tax or another will vary from state to state.
We have what are commonly referred to as death taxes. These are usually identified as an inheritance tax or an estate tax and vary by state. Estate taxes are based on the size of the estate while inheritance taxes are based on the relationship of the decedent to the beneficiary.
Another death tax is the federal estate tax which is based on the size of the estate. Currently, the federal estate tax does not come into play unless you have assets in the neighborhood of $12 million. However, you must keep in mind that, come 2026, that number is expected to drop significantly and more estates are likely to incur a federal estate tax liability. Federal estate taxes are IN ADDITION to any state death taxes which may be payable.
Here is a short comparison of estate and gift taxes by state across the nation:
NEW JERSEY – There is no estate tax, however there is an inheritance tax. The inheritance tax can be up to 15 percent based upon the relationship, but spouses and lineal descendants – children, grandchildren – and charities are exempt from inheritance taxes. Other beneficiaries are taxed at the rate of 15 percent.
PENNSYLVANIA – There is no estate tax, but there is an inheritance tax for anyone but a spouse or a charity. Children and grandchildren pay tax of 4.5 percent of their inheritance, siblings to the decedent are taxed at 12 percent and all others are taxed at 15 percent.
CONNECTICUT – There is an estate tax on par with the federal estate tax. However, should you be lucky enough to have an estate valued at $129 million or more, there is a cap of $15 million in Connecticut estate taxes. Further, Connecticut is the only jurisdiction in the U.S. with a gift tax.
IOWA – Here again, there is no estate tax but there is currently an inheritance tax which will be phased out or repealed completely for individuals dying after December 31, 2024.
NEBRASKA – While there is no estate tax, depending on the relationship and age of the beneficiary, inheritance tax can range up to 15 percent.
WASHINGTON DC – There is an estate tax for estates in excess of $4.3 million.
RHODE ISLAND – No inheritance tax but there is an estate tax that will kick in once an estate reaches $1.648 million.
VERMONT – Interestingly, Vermont has a flat tax rate of 16 percent for estates in excess of $5 million.
WASHINGTON STATE – While there is no inheritance tax, there is a state estate tax for estates over $2.193 million.
NEW YORK – An estate tax is assessed for estates in excess of $6.11 million. Unsurprisingly, New York has a twist in their estate tax with a built in “cliff.” For instance, if an estate is between 100% and 105% of the exemption amount, there’s a rapid phase-out of the exemption which estates in excess of 105 percent of the exemption amount will lose the benefit of the exemption amount entirely and be subject to tax from dollar one! In addition, if the decedent made a taxable gift within three years of death, the taxable gift amount is brought back into the estate for estate tax purposes.
Regardless of where you live, you are subject to taxes. But, as we know, we all pay taxes in one way or another. So I leave you with this question – what’s the best state to live in, with regard to taxes?
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