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 a majority of U.S. states do not collect an estate tax or an inheritance tax at the state level. Here is a summary of the changes to state estate taxes and inheritance taxes that took effect during the past few years:
- Delaware enacted a state 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.
- State estate taxes were abolished by legislative action on January 1, 2010 in both Kansas and Oklahoma.
- Hawaii enacted a state estate tax effective May 1, 2010, and in May 2012 the Hawaii estate tax laws were tweaked to provide that the Hawaii estate tax exemption will be tied to the federal estate tax exemption for decedents dying after January 25, 2012.
- On January 1, 2010, state estate taxes were repealed in both Illinois and North Carolina due to the repeal of the federal estate tax. Nonetheless, estate taxes came back in both states effective January 1, 2011, but North Carolina turned around and repealed its estate tax retroactively to January 1, 2013.
- In several states, including New Hampshire and Virginia, bills were defeated in 2009 that would have enacted a state estate tax.
- Effective January 1, 2010, Rhode Island's estate tax exemption increased to $850,000 and will be indexed for inflation thereafter. This means that the 2013 exemption has increased to $910,725, up from $892,865 in 2012.
- Effective January 1, 2011, Vermont's estate tax exemption increased to $2.75 million.
- Under Ohio budget laws the Ohio estate tax has been repealed as of January 1, 2013.
- On January 1, 2012, Oregon's estate tax rates changed such that estates valued between $1 million and $2 million will pay slightly less in estate taxes and estates valued over $2 million will pay more in estate taxes. Aside from this, in 2012 a ballot measure to completely repeal Oregon's estate tax was defeated by a majority vote.
- Ilinois' estate tax exemption increased to $3.5 million effective January 1, 2012, and to $4 million effective January 1, 2013.
- Maine's estate tax exemption increased to $2 million on January 1, 2013.
- Tennessee's estate tax exemption increased from $1,000,000 in 2012 to $1,250,000 in 2013 and the tax will be completely phased out by 2016.
- In 2012 legislation was passed that would have phased out Indiana's inheritance tax by 2022. In addition, the inheritance tax exemption was increased from $100,000 to $250,000 for certain family members effective January 1, 2012. Nonetheless, in May 2013 Indiana's inheritance tax was repealed retroactively to January 1, 2013, thereby allowing Indiana to join the list of states below.
- 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, thereby allowing North Carolina to join the list of states below.
List of States That Do Not Collect State Estate Taxes or Inheritance Taxes in 2013
Here is the list of the jurisdictions that do not impose a state estate tax or a state inheritance tax as of July 1, 2013:
- New Hampshire
- New Mexico
- North Carolina
- North Dakota
- South Carolina
- South Dakota
- West Virginia
For a list of the states that currently collect a state estate tax and their current exemption amounts, refer to the State Estate Tax and Exemption Chart.
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.
For an overview of state inheritance tax laws, refer to the State Inheritance Tax Chart.