NOTE: North Carolina repealed its state estate tax effective for deaths occurring on or after January 1, 2013. Therefore, the information below, which was written in May 2009, applies to deaths that occurred during 2009. In 2010 the North Carolina estate tax was repealed due to changes in federal estate tax laws upon which the North Carolina estate tax laws were based. In 2011 the North Carolina estate tax came back with a $5,000,000 exemption which increased to $5,120,000 in 2012.
North Carolina is another state that has decoupled its estate tax laws from the federal estate tax laws. What this means for North Carolina residents and nonresidents who own real estate or tangible personal property located in North Carolina is the following:
- While North Carolina has decoupled from the federal estate tax laws, it exempts the same amount of the estate from taxation as the federal law allows. This means that the first $3,500,000 of an estate is exempt from North Carolina estate taxes in 2009.
- A North Carolina Estate Tax Return, Form A-101, is required to be filed if a federal estate tax return, IRS Form 706, is required to be filed.
- Form A-101 must be filed with the North Carolina Department of Revenue at the same time IRS Form 706 is due, which is nine months from the decedent's date of death.
- For decedents dying on or after January 1, 2005, the North Carolina estate tax is equal to the state death tax credit that was allowable under section 2011 of the Internal Revenue Code as it existed prior to 2002. This makes the tax rate a progressive one that maxes out at 16% for the amount above $10,040,000.
- An inheritance and estate tax waiver, Form A-105, needs to be obtained from the Department of Revenue before ownership of a decedent's real property can be transferred to the estate beneficiaries.
This information is courtesy of the North Carolina Department of Revenue.
The bottom line - if you're a North Carolina resident and your estate is passing to someone other than your spouse and the value is $3,500,000 or more, or if you're a nonresident who owns real estate and/or tangible personal property located in North Carolina and your estate is valued at $3,500,000 or more, then your estate may owe a North Carolina estate tax. Up next, Ohio estate taxes.
- Understanding Death, Estate and Inheritance Taxes
- State Estate Tax Chart
- When is a Federal Estate Tax Return Required to Be Filed?
- Exemption From Federal Estate Taxes: 1997 - 2011
- How to Calculate Your Federal Estate Tax Liability
- How to Reduce or Even Eliminate Your Estate Tax Bill
- North Carolina Estate Planning Blog by Greg Herman-Giddens, Esq.