In New York, the estate tax rate ranges from 3.06% to 16%. In 2022, estates worth more than $6.11 million will be liable to this tax, which will rise to $6.58 million in 2023. Here is your comprehensive guide to New York estate tax regulations, whether you’re thinking about your own legacy while you enjoy your golden years or you’re the one dealing with determining your relative’s inheritance.
In this article, Eastcoastlaws.com will outline all you need to know about New York estate tax.
What Is the Estate Tax?
The estate tax is a tax imposed on the transfer of property at the time of a person’s death. It is typically assessed on the value of a person’s assets, including real estate, personal property, and investments, above a certain threshold, called the estate tax exemption. The tax rate varies depending on the value of the estate and can be as high as 40%. The estate tax is separate from the federal income tax and is typically imposed by individual states. The estate tax laws and rates can change over time, so it is important to check for updates and consult with a tax professional or attorney for specific advice.
Estate Tax In New York
The New York State estate tax is imposed on the transfer of property at death. It is separate from the federal estate tax. As of 2021, the estate tax rate ranges from 3.06% to 16% depending on the value of the estate, and there is an exemption for estates up to $5,850,000. This means that estates below this threshold are not subject to the estate tax. The estate tax laws and rates may change in the future, so it’s important to check for updates and consult with a tax professional or attorney for specific advice.
New York Inheritance Tax
In New York, there is no inheritance tax. You are not required to give any of the money you get from a relative to the state of New York. However, if the deceased person resided in another state, be sure to review the laws of inheritance taxes there in case they apply to you. For instance, if the individual leaving you an inheritance was a resident of Pennsylvania, the Keystone State’s inheritance tax may be applicable to you.
New York Estate Tax Exemption
The $6.11 million threshold for New York estate taxes in 2022 will increase to $6.58 million in 2023. The annual increase in that amount will be due to inflation. This means that if a person dies in 2023 and leaves behind an estate worth less than $6.58 million, the estate pays nothing to the state of New York. There is a “cliff” in New York that affects extremely rich homes. The estate only has to pay taxes on the amount that exceeds the $6.58 million exemption if the excess is less than 5%. Taxes are paid on the entire estate if the total value exceeds 105% of the exemptable amount.
Here’s an illustration of how that operates: $6.58 billion divided by 105% yields $6,909 billion. If the value of your estate falls between $6,58,000,000 and $6,909,000,000,000, only the excess above $6,58,000,000 is subject to tax. Therefore, even if your estate is worth $6.73 million, only $150,000 of it is taxed. All of an estate’s value over $6,909,000,000,000 is subject to taxation. You must pay estate taxes on your entire estate, for instance, if it is worth $6.75 million.
Also Read: SHOULD YOU HIRE A REAL ESTATE AGENT OR LAWYER TO BUY A HOUSE?
New York Estate Tax Rate
New York has a progressive estate tax rate. It begins at 3.06% and can reach 16%. The value of the estate over the $6.58 million exemption is the taxable estate (unless the estate exceeds the cliff at 105% of $6.58 million, in which case the entire estate is taxable). How to determine your cost is as follows: Determine the size of your taxable estate first. The taxable estate is equal to the whole estate less $6.58 million if your total estate is less than $6,909,000 million. Therefore, if your estate is valued $5.68 million, $100,000 will be taxed.
Then, in the table below, locate your taxable estate bracket. You owe base taxes, which are shown in the second column, on income that is below your tax rate. Then, multiply that amount by the marginal rate to determine the amount by which your estate exceeds the lower limit of your bracket. You should be able to calculate your debt by adding that amount to your base.
Here’s an illustration: Say your estate is worth $7 million in total. That goes over the cliff, therefore it’s all taxable. Next, we locate that number’s position on the chart. $522,800 is the base tax amount for this bracket. Since the minimum is $6.1 million, we deduct that amount from $7 million to arrive at $900,000. The result is $115,200 when multiplied by the marginal rate of 12.8%. On a $6 million estate, that sum plus the base rate results in a total tax of $638,000.
| NEW YORK ESTATE TAX RATES | |||
| Taxable Estate* | Base Taxes Paid | Marginal Rate | Rate Threshold** |
| $1 – $500,000 | $0 | 3.06% | $1 |
| $500,000 – $1 million | $15,300 | 5.0% | $500,000 |
| $1 million – $1.5 million | $40,300 | 5.5% | $1 million |
| $1.5 million – $2.1 million | $67,800 | 6.5% | $1.5 million |
| $2.1 million – $2.6 million | $106,800 | 8.0% | $2.1 million |
| $2.6 million – $3.1 million | $146,800 | 8.8% | $2.6 million |
| $3.1 million – $3.6 million | $190,800 | 9.6% | $3.1 million |
| $3.6 million – $4.1 million | $238,800 | 10.4% | $3.6 million |
| $4.1 million – $5.1 million | $290,800 | 11.2% | $4.1 million |
| $5.1 million – $6.1 million | $402,800 | 12.0% | $5.1 million |
| $6.1 million – $7.1 million | $522,800 | 12.8% | $6.1 million |
| $7.1 million – $8.1 million | $650,800 | 13.6% | $7.1 million |
| $8.1 million – $9.1 million | $786,800 | 14.4% | $8.1 million |
| $9.1 million – $10.1 million | $930,800 | 15.2% | $9.1 million |
| Over $10.1 million | $1.082 million | 16% | $10.1 million |
*The taxable estate is the amount above the exemption of $6.58 million.
**The rate threshold is the point at which the marginal estate tax rate goes into effect.
New York Gift Tax
New York State has a gift tax, which is a tax on gifts of money or property given by one individual to another. The tax is imposed on the person giving the gift (the “donor”), and is based on the fair market value of the gift. For gifts given in 2022 and beyond, the New York State gift tax rate is 16%. There is an annual exclusion of $15,000 per donee per year and a lifetime exclusion of $5,850,000. However, gifts to a spouse or to a tax-exempt organization are generally not subject to the gift tax. It’s important to note that the Federal government also has a gift tax, with a lifetime exclusion of $16,000 in 2022.
New York Estate Tax for Married Couples
Money left to a spouse after a person passes away is not subject to the federal or New York estate tax (more on this in the section below). The New York estate tax exemption is not transferable between spouses, therefore when the second spouse passes away, any portion of the estate with a value greater than $6.58 million will be subject to the standard New York estate tax laws. Some couples will make an effort to partially circumvent this by forming a trust with an amount equal to the estate tax exemption and subjecting it to the estate tax upon the passing of the first spouse, preventing the money from being taxed upon the passing of the second spouse.
Federal Estate Tax
Federal estate taxes are also levied. In 2022, the federal estate tax begins to apply, and in 2023, the threshold rises to $12.92 million. The estate tax exemption is transferable between spouses under federal law. This means that, with the proper legal action, the estate exemption for a married couple can be increased by two when the second spouse passes away. As a result, a couple might exclude up to $25.84 million from federal estate taxes.
The top tax rate for estates that still exceed this amount is 40%. The complete list of progressive tax rates is shown in the chart below.
To calculate your federal estate tax liability, follow the same steps outlined above in the section on the New York estate tax.
| FEDERAL ESTATE TAX RATES | |||
| Taxable Estate* | Base Taxes Paid | Marginal Rate | Rate Threshold** |
| $1 – $10,000 | $0 | 18% | $1 |
| $10,000 – $20,000 | $1,800 | 20% | $10,000 |
| $20,000 – $40,000 | $3,800 | 22% | $20,000 |
| $40,000 – $60,000 | $8,200 | 24% | $40,000 |
| $60,000 – $80,000 | $13,000 | 26% | $60,000 |
| $80,000 – $100,000 | $18,200 | 28% | $80,000 |
| $100,000 – $150,000 | $23,800 | 30% | $100,000 |
| $150,000 – $250,000 | $38,800 | 32% | $150,000 |
| $250,000 – $500,000 | $70,800 | 34% | $250,000 |
| $500,000 – $750,000 | $155,800 | 37% | $500,000 |
| $750,000 – $1 million | $248,300 | 39% | $750,000 |
| Over $1 million | $345,800 | 40% | $1 million |
*The taxable estate is the total above the exemption of $12.92 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Do You Need to File a New York Estate Tax Return?
If the gross estate of a New York resident has a value of more than $6.11 million, the personal representative or executor of the estate must file a state estate tax return. (Smaller estates won’t need to file a return.) Your gross estate will include just about all of the property you own at your death:
- Real estate
- Bank and investment accounts—retirement and non-retirement
- Vehicles and other items of personal property
- Proceeds from any life insurance policies on your life, if you owned the policies
- Your business interests (sole proprietorship, limited liability company, or closely held corporation)
- Any property you hold in a revocable living trust
Co-owned property. If you own assets with someone else, generally only your share will be included in your estate. In other words, if you and your spouse own your house, half of its value would be included in your estate.
Non probate assets. Notably, your gross estate also includes non-probate assets. For example, the property you hold in a revocable living trust avoids probate, but it does not avoid estate taxes and is counted in your gross estate.
Portability. The federal estate tax regime allows a surviving spouse to use the deceased spouse’s unused portion of the exemption—a feature called “portability.” However, New York’s estate tax does not offer portability between spouses; each spouse has a separate exemption amount of $6.11 million.
Will Your Estate Owe Estate Tax?
Whether or not an estate will owe estate tax depends on the value of the estate and the applicable tax laws in place at the time of death. Generally, if the value of the estate is less than the basic exclusion amount, the estate will not owe estate tax. In the case of New York State, for derivatives that die on or after January 1, 2022, the basic exclusion amount is $5,850,000, meaning that estates with a total value less than this amount are not subject to the estate tax.
It’s important to note that even if an estate is not subject to the state estate tax, it may still be subject to the federal estate tax, with a basic exclusion amount of $11,700,000 in 2022. So, even if an estate is not subject to the state estate tax, it may still owe federal estate tax if the value of the estate exceeds the federal basic exclusion amount.
It’s always best to consult with an attorney or estate planning professional to determine if an estate will owe estate tax for a specific estate. They can help to review the value of the estate and the applicable tax laws and provide guidance on how to minimize or avoid estate tax liability.
Deadlines for Filing the New York Estate Tax Return
The deadline for filing a New York estate tax return depends on the date of death of the decedent. Generally, the return must be filed within nine months of the decedent’s date of death. However, if the estate is entitled to an automatic six-month extension, the return must be filed within 15 months of the decedent’s date of death.
It’s important to note that the estate tax return must be filed and any tax due must be paid before the distribution of any assets from the estate can occur. Additionally, the executor of the estate is responsible for filing the return and paying any tax owed. If the estate tax return is not filed on time or the tax is not paid when due, the executor may be subject to penalties and interest.
It’s always best to consult with an attorney or estate planning professional to determine the specific deadline for filing the estate tax return for a particular estate and to ensure that the return is filed and any taxes are paid in a timely manner.
