Which States Still Collect a State Estate Tax?
14 states and the District of Columbia still collect an estate tax
Taxes tend to come due whenever money or property changes hands, whether it be in the form of wages or gifts. The estate tax applies to the latter – it's levied when someone dies and his property passes to living beneficiaries and heirs.
The federal government imposes an estate tax, payable by the estate, on the value of a decedent's property. Several states and the District of Columbia also collect an estate tax.
Typically only very wealthy estates are subject to this tax, however, thanks to something called an exemption – a dollar value that can be passed tax-free. Only the portion of an estate that exceeds this value is taxed. Both the federal government and states provide estate tax exemptions.
States That Have Repealed Their Estate Tax
Four states saw their state estate taxes disappear on January 1, 2010: Illinois, Kansas, North Carolina and Oklahoma. But estate taxes came back for both Illinois and North Carolina on January 1, 2011. North Carolina's estate tax was eventually repealed retroactively in July 2013 to January 1, 2013.
Ohio's estate tax was repealed on January 1, 2013, and Tennessee's estate tax disappeared on January 1, 2016.
States That Still Collect an Estate Tax
The following states still impose an estate tax as of 2017.
The Connecticut estate tax exemption was lowered from $3,500,000 to $2,000,000 in May 2011.
The reduction was made retroactive to January 1, 2011. The state's 2015 bi-annual budget included a provision capping the estate tax at $20 million effective January 1, 2016, but this obviously benefits only extremely large estates, those worth $170 million or more. The maximum estate tax rate in Connecticut is 12 percent.
Delaware enacted an estate tax effective July 1, 2009. It was supposed to expire on July 1, 2013, but the Delaware legislature acted to eliminate the "sunset" of the tax in the spring of 2013 so it lives on. Estates with values over $5.49 million are subject to a tax of as much as 16 percent.
The District of Columbia's estate tax rate ranges from 8 to 16 percent. Its estate tax exemption is $1 million.
Although the governor vetoed an estate tax for Hawaii, the legislature overrode him and enacted a tax effective May 1, 2010. The state's exemption is the same as it is at the federal level: $5.49 million as of 2017. The exemption was indexed for inflation beginning with deaths occurring after January 25, 2012. The maximum estate tax rate is 16 percent.
Illinois' estate tax came back on January 1, 2011, with a $2 million exemption which increased to $3.5 million in 2012 and $4 million in 2013. That's where it remains as of 2017. The top rate is 16 percent.
Maine's estate tax exemption increased to $2 million in 2013, then to $5.49 million in 2017 to mirror the federal exemption. Legislation in 2013 also changed the tax rates. Estates valued between $2 million and $5 million must pay 8 percent.
Those valued between $5 million and $8 million pay 10 percent, and those exceeding $8 million pay 12 percent.
Legislation passed in 2014 increased Maryland's estate tax exemption to $1.5 million for 2015, to $2 million in 2016 and to $3 million in 2017. It will increase again to $4 million for deaths that occur in 2018. Beginning in 2019, the exemption will match that at the federal level. Estates are taxed at a rate of 16 percent in Maryland.
This state's exemption is only $1 million. Estate tax rates range from 8 percent to 16 percent.
Legislation enacted in 2014 set the estate tax exemption at $1.2 million. It also provided for it to increase in $200,000 increments until it reaches $2 million, which will occur in 2018. It's $1.8 million as of 2017. Rates begin at 9 percent and top out at 16 percent for larger estates.
New Jersey's estate tax exemption was anything but generous – just $675,000 – but it increased to $2 million in 2017 and the estate tax will be eliminated entirely as of 2018.
New York overhauled its estate tax laws with its 2014-2015 executive budget. The exemption was set at $4,187,500 for deaths occurring between April 1, 2016, and March 31, 2017. As of April 1, 2017, it jumped to $5.25 million where it will remain until December 31, 2018. It will match the federal estate tax exemption beginning January 1, 2019. The maximum tax rate is 16 percent.
Effective January 1, 2012, Oregon's estate tax rate extends from 10 to 16 percent. Estates valued at more than $9.5 million are taxed at the highest rate. The exemption is $1 million.
Rhode Island's estate tax exemption increased from $675,000 to $850,000 on January 1, 2010, and it was to be indexed for inflation in future years. Then, on June 19, 2014, it was increased to $1.5 million. In conjunction with inflation, this puts the exemption at $1,515,156 as of 2017. The top tax rate is 16 percent.
Vermont's exemption was bumped up from $2 million to $2.75 million effective January 1, 2011, and it remains at that number. Rates range from 8 percent to 16 percent.
Washington's $2 million estate tax exemption was indexed for inflation beginning in 2014. It stands at $2,129,000 as of 2017. The state actually tried to repeal the tax in 2006 but voters rejected the offer. Washington's top tax rate is a walloping 20 percent.
NOTE: State laws are subject to change. The above information may not reflect the most recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney. The information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.