Several states have this tax on the transfer of property after death. Know whether the rules and thresholds apply.
Also known as the “death tax,” the federal estate tax is a tax that’s levied on a dead person’s inherited assets. The estate tax ranges from rates of 18% to 40% and generally only applies to assets over $13.61 million in 2024.
Thirteen states levy an estate tax. An estate’s value can determine whether it’s exempt from the tax or not, and those thresholds can vary from state to state.
The IRS exempts estates of less than $13.61 million from the tax in 2024 ($12.92 million in 2023), so few people actually end up paying it.
If you inherit stocks, cash, or small amounts of other assets, unless they add up to $13.61 million in 2024, you probably won’t have to pay the estate tax. Plus, that exemption is per person, so a married couple could double it. The IRS taxes estates above that threshold at rates of up to 40%.
To see if your state has an estate tax, check the state estate tax chart below, and refer to your state’s department of revenue and taxation website for the most up-to-date information.
The federal estate tax is assessed on the current fair market value of the assets.
In other words, the tax is calculated based on what the assets are worth today, not the original value at the time of purchase.
Assets inherited by the surviving spouse are generally not subject to the federal estate tax because of the unlimited marital deduction.
IRS Form 706 also has the details on exactly which assets count in the calculations for the federal estate tax, how to find their value and how to calculate what you owe. But in general, you figure the tax by applying the rates below to the amount of the estate that’s subject to tax. See a qualified tax professional if you have questions.
Tax rate | Taxable amount | Tax owed |
---|---|---|
18% | $0 to $10,000. | 18% of taxable amount. |
20% | $10,001 to $20,000. | $1,800 plus 20% of the amount over $10,000. |
22% | $20,001 to $40,000. | $3,800 plus 22% of the amount over $20,000. |
24% | $40,001 to $60,000. | $8,200 plus 24% of the amount over $40,000. |
26% | $60,001 to $80,000. | $13,000 plus 26% of the amount over $60,000. |
28% | $80,001 to $100,000. | $18,200 plus 28% of the amount over $80,000. |
30% | $100,001 to $150,000. | $23,800 plus 30% of the amount over $100,000. |
32% | $150,001 to $250,000. | $38,800 plus 32% of the amount over $150,000. |
34% | $250,001 to $500,000. | $70,800 plus 34% of the amount over $250,000. |
37% | $500,001 to $750,000. | $155,800 plus 37% of the amount over $500,000. |
39% | $750,001 to $1,000,000. | $248,300 plus 39% of the amount over $750,000. |
40% | $1,000,001 and up. | $345,800 plus 40% of the amount over $1,000,000. |
Several states and the District of Columbia have an estate tax. Many have lower asset thresholds than the federal government. Each state’s exclusion amount is in the table below.
If you live in a state with an estate tax, the good news is that (generally speaking) your estate tax bill is subtracted from the value of your taxable estate before you calculate what you might owe the IRS.
State | 2023 exemption amount | 2024 exemption amount |
---|---|---|
Connecticut | $12.92 million. | $13.61 million. |
District of Columbia | $4.52 million. | $4.71 million. |
Hawaii | $5.49 million. | $5.49 million. |
Illinois | $4 million. | $4 million. |
Maine | $6.41 million. | $6.8 million. |
Maryland | $5 million. | $5 million. |
Massachusetts | $1 million. | $2 million. |
Minnesota | $3 million. | $3 million. |
New York | $6.58 million. | $6.94 million. |
Oregon | $1 million. | $1 million. |
Rhode Island | $1.73 million. | $1.77 million. |
Vermont | $5 million. | $5 million. |
Washington | $2.19 million. | $2.19 million. |
A few states have an inheritance tax, which is different from an estate tax. Inheritance taxes are paid by heirs or inheritors generally upon receiving the inherited assets. An estate tax, on the other hand, is a tax levied on the entire taxable estate itself. Executors of the estate use Form 706 to figure the amount owed.
If you want to reduce your estate taxes before you die, there are some tactics you might use to protect your property. They include:
Even if an inheritance isn’t taxed when your heirs receive it, any subsequent earnings or income that it produces may be considered taxable capital gains at the federal and state levels.
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