Estate taxes and exemptions are currently in place across 15 states at the start of 2016, the district of Columbia has levied estate tax, while six other states have opted for an inheritance tax with Maryland and New Jersey levying both taxes. The information below presents you with an overview of the each state collecting tax, the tax to be collected, the 2016 exemption and the top death tax rates of 2016.
Estate Taxes vs. Inheritance Taxes
Before proceeding with a discussion of estate taxes and exemptions, it is imperative that a distinguish between estate tax and inheritance is outlined. This distinction is important as states such as Maryland and New Jersey collect taxes for both the estate and inheritance.
Estate taxes are taxes charged against the estate in its entirety. This tax is independently charged regardless of those inheriting assets from the estate. Inheritance tax on the other hand, is the tax charged against the proportion of the estate inherited by the beneficiary based upon the relationship of the inheritor to the deceased. Different exemptions can apply based on the relationships between spouses, children or siblings and the deceased.
The map above shows Washington with the highest maximum estate tax rate at 20%. A total of 11 estates have a maximum tax rate of 16%. Six states have inheritance with Nebraska the highest rate of 18%, followed closely by Kentucky and New Jersey with a top rate of 16%.
Hawaii and Delaware have the highest exemption threshold at $5,430,000 (matching the federal exemption). District of Columbia and Massachusetts have opted for an exemption of $1,000,000 while New Jersey has the lowest estate exemption if just $675,000.
Of the six states with inheritance taxes, Nebraska has the highest top rate at 18 percent. Kentucky and New Jersey are close behind with top rates of 16 percent.
2016 will provide some estate taxes and exemptions changes for certain states, Tennessee has phased out its estate tax in its entirety. Maryland and New York on the other hand, have opted to increase their taxation exemption to match the federal exemption of $5,900,000 by the year 2019. Minnesota is in the process of doubling its exemption from $1 million to $2 million over five years.
|State||Exemption||Rate% Min – Max|
|Connecticut||$2,000,000||7.2% – 12%|
|Delaware||$5,430,000||0.8% – 16%|
|Hawaii||$5,430,000||0.8% – 16%|
|Illinois||$4,000,000||0.8% – 16%|
|Maine||$2,000,000||8.0% – 12%|
|Massachusetts||$1,000,000||0.8% – 16%|
|Minessota||$1,400,000||9.0% – 16%|
|New Jersey||$ 675,000||0.8% – 16%|
|New York||$2,062,500||3.06% – 16%|
|Oregon||$1,000,000||0.8% – 16%|
|Rhode Island||$1,500,000||0.8% – 16%|
|Tennessee||$5,000,000||5.5% – 9.5%|
|Vermont||$2,750,000||0.8% – 16%|
|Washington||$2,054,000||10% – 20%|
|District of Columbia||$1,000,000||0.8% – 16%|
How Can We Help You?
For more information on estate taxes and exemptions, read some of the other articles on this website.
You can also check out our book Estate Planning Essentials. It introduces you to estate planning and shows you how you can make an effective estate plan quickly and easily without the need for a lawyer. You’ll learn about estate planning devices such as wills, trusts, powers of attorney, medical directives, probate avoidance methods and more. To help you get a fuller understanding, particular attention is paid throughout to beneficiaries, children, disinheritance, incapacity, estate taxes and inheritance taxes. If you want to prepare an estate plan, this book is for you.
If you have any questions about our products or services, please contact our customer service team, who would be delighted to assist you.
Adrienne is an author and estate planning expert.