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Estate Taxes by State - Does Colorado Have an Estate Tax?

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  • august 11
  • Does Colorado collect an estate tax? The answer is no, Colorado currently does not collect an estate tax, although things were different prior to January 1, 2005, when Colorado, like many other states, collected a separate state estate tax, called a "pick up tax," that was actually equal to a portion of the overall federal estate tax bill.

    On January 1, 2005, the pick up tax was officially phased out under the provisions of the Economic Growth and Tax Relief Reconciliation Act ("EGTRRA"). In response to this change in federal law, some states that used to collect a pick up tax chose to enact laws that allow the state to still collect a state estate tax. But the Colorado legislature did nothing and as a result Colorado no longer collects a state estate tax.  The number of states that do not collect a state estate tax now sits at 32 since Delaware enacted a state estate tax effective July 1, 2009. For a complete list of the 19 jurisdictions that assess an estate tax at the state level and their current estate tax exemptions, see the State Estate Tax Chart.

    With all of that said, under current federal law the pick up tax, and therefore the Colorado estate tax, is scheduled to come back in 2011 due to the sunset of EGTRRA. But no one really believes that Congress and President Obama will allow EGTRRA to sunset. Instead, it is anticipated that at the very least a two or three year patch will be enacted that will keep the federal estate tax in place and possibly bring back the pick up tax, which has already been proposed by H.R. 2023, introduced by Rep. Jim McDermott (D-WA) in April 2009.

    2011 Update: On December 17, 2010, President Obama signed the Taxpayer Relief Act of 2010 (TRA 2010) into law, which overrode the provisions of EGTRRA with regard to estate taxes. As a result of this new law, the pick up tax was not reinstated, and so Colorado will not collect a state estate tax for the 2011 and 2012 tax years. Nonetheless, the provisions of TRA 2010 are set to sunset on December 31, 2012, in which case the pick up tax, as well as the Colorado estate tax, will return on January 1, 2013. Stay tuned for updates as they become available.

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