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.
Summary of Changes in State Estate Tax and Inheritance Tax Laws
Four states saw their state estate taxes disappear on January 1, 2010: Illinois, Kansas, North Carolina and Oklahoma; however, estate taxes came back for both Illinois and North Carolina on January 1, 2011.
Hawaii enacted an estate tax effective May 1, 2010. Before that Delaware enacted an estate tax effective July 1, 2009 which was supposed to expire on July 1, 2013; nonetheless, the Delaware legislature acted in the spring of 2013 to eliminate the sunset of the tax.
Rhode Island's estate tax exemption increased from $675,000 to $850,000 on January 1, 2010, and will be indexed for inflation in future years. The 2013 exemption is $910,725, up from $892,865 in 2012.
In May 2011 the Connecticut estate tax exemption was lowered from $3,500,000 down to $2,000,000 and the reduction was made retroactive to January 1, 2011. In 2013 the exemption remains at $2,000,000.
Ohio's estate tax was repealed on January 1, 2013.
Illinois' estate tax came back on January 1, 2011 with a $2,000,000 exemption which increased to $3,500,000 in 2012 and $4,000,000 in 2013.
The state estate tax exemptions for Delaware and Hawaii follow the federal estate tax exemption.
Tennessee's estate tax exemption increased to $1,250,000 in 2013 and the tax will be completely phased out by 2016.
Indiana's inheritance tax exemption for certain family members was increased from $100,000 to $250,000 effective for deaths between January 1, 2012 and December 31, 2012. In addition, while Indiana's inheritance tax was supposed to be phased out by 2022, in May 2013 the inheritance tax was retroactively repealed to January 1, 2013.
In June 2013, Washington made several changes to its state estate tax laws. Beginning in 2014, the $2 million estate tax exemption will be indexed for inflation; an estate tax deduction of up to $2.5 million will be available for certain family-owned business interests the values of which do not exceed $6 million; and the estate tax rates on the top four estate tax brackets will be increased.
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.
In July 2013, North Carolina's estate tax was repealed retroactively to January 1, 2013.
Lowest and Highest State Estate Tax Exemptions
For the 2013 tax year, New Jersey has the lowest state estate tax exemption at $675,000. The estate tax exemptions for the other states that collect state estate taxes range from $910,725 in Rhode Island to $4,000,000 in Illinois and $5,250,000 in Delaware and Hawaii, with the majority of states and the District of Columbia only offering a $1,000,000 exemption.
For a chart showing the 2013 state exemptions and highest applicable tax rates, refer to the 2013 State Death Tax Exemption and Top Tax Rate Chart.
2013 List of States That Collect an Estate Tax and/or Inheritance Tax at the State Level
Here is the list of jurisdictions that collect a state estate tax or a state inheritance tax as of July 1, 2013:
- Connecticut - estate tax and gift tax
- Delaware - estate tax
- District of Columbia - estate tax
- Hawaii - estate tax
- Illinois - estate tax
- Iowa - inheritance tax
- Kentucky - inheritance tax
- Maine - estate tax
- Maryland - estate tax and inheritance tax
- Massachusetts - estate tax
- Minnesota - estate tax and gift tax
- Nebraska - inheritance tax
- New Jersey - estate tax and inheritance tax
- New York - estate tax
- Oregon - estate tax
- Pennsylvania - inheritance tax
- Rhode Island - estate tax
- Tennessee - estate tax
- Vermont - estate tax
- Washington - estate tax
To find out the current and past state estate tax exemptions for each jurisdiction listed above, refer to the State Estate Tax and Exemption Chart.
For an overview of state inheritance tax laws, refer to the State Inheritance Tax Chart.