Here Are the States With No Estate or Inheritance Taxes
In addition to federal taxes, many Americans face numerous types of state taxes. Although there are some states that don’t have income taxes, all states have some sort of revenue-generating assessments, from sales and property taxes to even taxes on Social Security.
While all states used to levy estate taxes as well, they began to phase out after new legislation in 2001 changed the federal and state estate tax structure. Now, just 17 states and the District of Columbia assess their own estate or inheritance taxes. Here’s a look at the states where you can and can’t avoid estate or inheritance taxes, along with how much you can expect to pay.
States With No Estate or Inheritance Taxes
Here are the states where you won’t have to pay separate estate or inheritance taxes:
- New Hampshire
- New Mexico
- North Carolina
- North Dakota
- South Carolina
- South Dakota
- West Virginia
States That Have Estate or Inheritance Taxes
This leaves 17 states, plus the District of Columbia, that still levy estate or inheritance taxes on their residents, as follows:
- District of Columbia
- New York
- Rhode Island
- New Jersey
What Is the Difference Between Estate and Inheritance Taxes?
Although estate and inheritance taxes are both considered “death” taxes, they function differently. Whereas estate taxes are levied on a decedent’s assets and encompass the entire estate, inheritance taxes are paid by beneficiaries, and only on the amount they individually receive.
How Much Can You Expect To Pay in Estate or Inheritance Taxes?
Federal estate taxes top out at 40%, but there’s a sizable exemption that prevents most estates from facing any tax at all. For 2022, the first $12.06 million of the estate of a single decedent is exempt from federal estate taxes, doubling to $24.12 million for married couples. Beyond those levels, the first $1 million is taxed at rates from 18% to 39%, with excess amounts rapidly hitting the 40% maximum tax threshold.
State estate or inheritance taxes are much lower, but they’re still significant when tacked on to the high federal rates. The highest state tax rates can be found in Washington and Hawaii — each reach 20%. Other states have estate and inheritance taxes ranging from 10% to 16%.
Connecticut has the highest tax exemption level at $9.1 million, while Oregon and Massachusetts have the lowest at just $1 million. While most states only levy either an estate or an inheritance tax, Maryland is the outlier, as it assesses both.
The Bottom Line
Estate and inheritance taxes can be complicated, and if you anticipate being in the position of having to pay them, it’s best to consult an estate planning attorney early on. Fortunately, most estates and bequests are far smaller than the minimum amount to trigger taxes — particularly on a federal level — but you don’t want to overlook any levies that your individual state may make, which can occur at much lower levels.
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