You may not owe a federal estate tax, but what about the state level?

| Jan 25, 2021 | Tax Collection

The federal estate tax, in 2020, is set to tax the transfer of estates valued over $11.58 million, or $23.16 million for a married couple. Although most families do not need to take steps to help preserve this level of wealth, there is still the possibility of a state tax. Although many have reduced or eliminated this draconian tax, others continue to bill inheritance or estate taxes. Some even double dip and charge both.

Which states charge an estate or inheritance tax?

Connecticut, the District of Columbia, Maine, Maryland and Massachusetts are a few examples from the Northeast. In Connecticut, estates over $5.1 million are taxed at 10 to 12%, the District of Columbia on estates over $5.7624 at 12 to 16%, Maine on those over $5.8 million at 8 to 12% and Massachusetts taxes everything over $1 million at 0.8 to 16%. None have an inheritance tax. Maryland taxes estates valued over $5 million at 0.8 to 16% and also has a flat 10% inheritance tax.

New Jersey, New York and Pennsylvania also have state taxes, with New Jersey putting an inheritance tax of 11 to 16% on all inherited property valued over $500, New York taxing every estate valued over $5.85 million at 3 to 16% and Pennsylvania applying a 4.5 to 15% inheritance tax.

Unfortunately, no area in the country is free from some state taxes. Minnesota and Idaho have similar taxes in the Midwest and Washington has a tax out West.

What options are available for those who live in these states?

Those who live in states that have an estate or inheritance tax have options. Proactive tax planning can reduce your estate’s tax burden. The attorneys at Goldburd McCone are familiar with these planning strategies and can discuss the options that make the most sense for your estate.