NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
Currently only a handful of states and the District of Columbia collect a state estate tax. Below is a chart that lists which states collected state estate taxes from 2009 through 2014, along with each state's respective state estate tax exemption for the same years.
Summary of Changes to State Estate Tax Laws
Here is a summary of the changes that took effect with regard to state estate tax laws in recent years:
- Delaware enacted a state estate tax that was only supposed to be effective for deaths occurring between July 1, 2009 and July 1, 2013. Nonetheless, in the spring of 2013 the Delaware legislature acted to eliminate the sunset of the tax.
- Two states saw their estate tax exemption increase on January 1, 2010: Rhode Island's exemption increased to $850,000 and Connecticut's exemption increased to $3,500,000; however, see more on these two states below.
- Two states saw their state estate tax disappear on January 1, 2010, due to state legislative action: Kansas and Oklahoma.
- On June 27, 2011, S.L. 2011-330 was signed into law by North Carolina Governor Beverly Perdue. This law clarifies that the North Carolina estate tax does not apply to the estates of decedents who died in 2010 but will apply to the estates of decedents dying on or after January 1, 2011 with a $5,000,000 exemption, which is indexed for inflation in 2012 and future years. However, in July 2013, the North Carolina estate tax was repealed retroactively to January 1, 2013.
- Illinois saw its estate tax disappear on January 1, 2010 due to repeal of the federal estate tax, and despite the retroactive reinstatement of the federal estate tax, Illinois' tax did not come back automatically like in North Carolina. Nonetheless, the Illinois legislature acted quickly at the beginning of 2011 to reinstate the Illinois estate tax for the 2011 tax year with a $2,000,000 exemption. However, in December 2011 the Illinois legislature acted to increase the exemption to $3,500,000 in 2012 and $4,000,000 in 2013 and future years.
- *Hawaii brought back its state estate tax effective May 1, 2010. Note that although the Hawaii estate tax exemption appears to be set at $3,500,000 for deaths occurring before January 26, 2012, in calculating the tax due the tax really does not kick in until the estate exceeds $3,600,000. In addition, in May 2012 Hawaii tweaked its estate tax laws to provide that the Hawaii estate tax exemption will be tied to the federal estate tax exemption for decedents dying after January 25, 2012. In addition, Hawaii appears to be the first and only state which will allow "portability of the estate tax exemption" between spouses at the state level. See the instructions to the Hawaii estate tax return, Form M-6, for more information about this.
- The Rhode Island estate tax exemption will be adjusted for deaths occurring on or after January 1, 2011 based on the percentage increase in the Consumer Price Index rounded to the nearest $5.00.
- Vermont's estate tax exemption increased to $2,750,000 effective January 1, 2011.
- On May 4, 2011, the Connecticut estate tax exemption was retroactively decreased from $3,500,000 back down to $2,000,000 for deaths occurring on or after January 1, 2011.
- On June 30, 2011, Ohio Governor John Kasich signed the 2012 - 2013 budget into law, which eliminates the Ohio estate tax effective for deaths occurring on or after January 1, 2013.
- On January 1, 2012, the name of Oregon's death tax changed from an "inheritance tax" to an "estate tax." In addition, while the Oregon estate tax exemption (formerly inheritance tax exemption) remains at $1,000,000 for 2012 and future years, the tax will only apply to the value of an estate in excess of $1,000,000 (under prior law once an estate exceeded $1,000,000 the tax applied to the entire estate). The estate tax rates have also been changed for 2012 and future years such that the majority of estates valued between $1,000,000 and $2,000,000 will pay slightly less in taxes and estates valued over $2,000,000 will pay slightly more in taxes. Note that on November 6, 2012, Oregon Ballot Measure 84, which would have repealed Oregon's estate tax by 2016, was defeated, so it does not appear that Oregon's estate tax will be repealed any time soon.
- Effective January 1, 2013, Maine's estate tax exemption increased to $2,000,000 and the estate tax rate has been lowered.
- In May 2012 Tennessee repealed its state gift tax retroactively to January 1, 2012. In addition, the Tennessee estate tax (referred to as an inheritance tax in the Tennessee statutes) will be phased out by 2016.
- In June 2013, Washington tweaked its state estate tax laws in several ways that will affect the estates of decedents who die on or after January 1, 2014. First, the $2,000,000 exemption will be indexed for inflation on an annual basis. Second, the estate tax rates for the top four brackets will increase by one percentage point. Finally, certain family-owned businesses will receive an estate tax exemption of up to $2,500,000.
- In an unusual move, Minnesota enacted a state gift tax that went into effect on July 1, 2013. Aside from this, Minnesota tweaked its estate tax laws as they are applied to nonresidents who own real estate in Minnesota. The new legislation includes Minnesota property held in a pass-through entity such as an S corporation, a partnership (including a multi-member LLC taxed as a partnership), a single-member LLC or similar entity, or a trust in a nonresident's estate. But in another unusual move, Governor Mark Dayton signed legislation on March 21, 2014 which repealed the state gift tax retroactively. In addition, the state estate tax exemption was retroactively increased to $1,200,000 for all 2014 deaths and the estate tax rate was tweaked so that the first dollars are taxed at a 9% rate which maxes out at 16%. The estate tax exemption will then be increased in $200,000 increments so that it reaches $2,000,000 by 2018. The new law also allows married couples to use ABC Trust planning in order to defer the payment of all estate taxes until after the death of the second spouse. Finally, the law taxing a nonresident decedent's interest in a pass-through entity was also modified to exclude certain publicly traded entities, but it still applies to entities taxed as partnerships or S corporations that own a closely held business, farm, or cabin.
- On April 1, 2014, New York made significant changes to its estate tax laws by increasing the state estate exemption to $2,062,500. The exemption will then continue to increase on an annual basis until it matches the federal estate tax exemption in 2019. Refer to Overview of Changes to the New York Estate Tax Exemption Between 2014 and 2019 for a summary of the annual adjustment to the New York exemption that will be made in future years.
State Estate Tax Rates
For information about 2014 state estate tax rates, refer to the 2014 State Death Tax Exemption and Top Tax Rate Chart.
State Inheritance Taxes
For information about state inheritance taxes, which are not the same as state estate taxes, refer to the State Inheritance Tax Chart.
**The exemption is $1,000,000 prior to April 1, 2014, and $2,062,500 effective April 1, 2014
State Estate Tax and Exemption Chart
|State||2009 Exemption||2010 Exemption||2011 Exemption||2012 Exemption||2013 Exemption||2014 Exemption|
|Delaware||$3,500,000 effective 07/01/2009||$3,500,000||$5,000,000||$5,120,000||$5,250,000||$5,340,000|
|District of Columbia||$1,000,000||$1,000,000||$1,000,000||$1,000,000||$1,000,000||$1,000,000|
|*Hawaii||No state estate tax||$3,600,000 effective 05/01/2010||$3,600,000||$3,600,000 or $5,120,000||$5,250,000||$5,340,000|
|Illinois||$2,000,000||No state estate tax||$2,000,000||$3,500,000||$4,000,000||$4,000,000|
|Kansas||$1,000,000||No state estate tax||No state estate tax||No state estate tax||No state estate tax||No state estate tax|
|New York||$1,000,000||$1,000,000||$1,000,000||$1,000,000||$1,000,000||**$1,000,000 or $2,062,500|
|North Carolina||$3,500,000||No state estate tax||$5,000,000||$5,120,000||No state estate tax||No state estate tax|
|Ohio||$338,333||$338,333||$338,333||$338,333||No state estate tax||No state estate tax|
|Oklahoma||$3,000,000||No state estate tax||No state estate tax||No state estate tax||No state estate tax||No state estate tax|