In addition to the federal estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. of 40 percent (which is Facts & Figures.
Currently, fourteen states and the District of Columbia impose an estate taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. while six states have an inheritance taxAn inheritance tax is levied upon an individual’s estate at death or upon the assets transferred from the decedent’s estate to their heirs. Unlike estate taxes, inheritance tax exemptions apply to the size of the gift rather than the size of the estate. . Maryland and New Jersey have both.
The state with the highest maximum estate tax rate is Washington (20 percent), followed by ten states and the District of Columbia with a top rate of 16 percent. Delaware and Hawaii have the highest exemption thresholds, which at $5,450,000 match the federal exemption. At $675,000, New Jersey’s exemption is the lowest.
Of the six states with inheritance taxes, Kentucky and New Jersey have the highest top rates at 16 percent. Maryland offers the lowest top rate, at 10 percent. All six states exempt spouses, and some go farther to exempt immediate relatives or lineal heirs.
Tennessee repealed its estate tax (confusingly called an inheritance tax by the state) this year, the culmination of a multi-year phase-out, and Indiana completed the repeal of its inheritance tax in 2013. New York are in the process of phasing in new, higher estate tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the IRS, preventing them from having to pay income tax. s, eventually matching the federal exemption level ($5.9 million) by 2019. District of Columbia is slated to phase in higher exemptions to the estate tax as new revenues become available.
Estate and inheritance taxes have large compliance costs, tend to suppress entrepreneurship, and are among the most harmful taxes to here for more information on estate and inheritance taxes.Share