The majority of states do not levy taxes on estates. But, if you live in a state that does, also, you could face a tax if your estate is valued at $5 million or less. Generally, estate taxes are a sizable concern for wealthier people. Luckily, a financial advisor can help you create an effective estate plan to reduce or even eliminate estate taxes in your state.
Estate Tax Essentials
Estate taxes are charged to an estate after someone dies. Unlike inheritance taxes, which are paid by the beneficiaries of the estate, the estate itself must pay estate taxes. This can reduce the amount of money that goes to heirs.
The federal estate tax is rarely paid because it exempts estates smaller than $13.161 million or, for a couple, $26.322 million in 2024. Most estates are also exempt from state taxes, primarily because only 12 states and the District of Columbia levy these taxes.
Even in jurisdictions that have estate taxes, most estates still escape them due to exemptions that range from as low as $1 million to as high as the $13.161 million federal level. If an estate exceeds these exemptions, it could have to pay both federal and state estate taxes.
Estate taxes are calculated in different ways. The federal government and some states use a progressive method, with higher tax rates applied to larger estates. However, a flat estate tax applied to estates of any size may also be used.
Another way states vary concerns spousal portability. This concept lets a surviving spouse use a deceased partner’s unused estate tax exemption. Combining exemptions in this way allows a larger estate to escape taxation. The federal government and some states provide for spousal portability, but several do not.
States With Estate Taxes
Here’s a list of the states that have estate taxes, with key features for each as of 2024. Any state not on this list has no estate tax:
Connecticut. The exemption for Connecticut estates is $13.161 million, the same as the federal level. Rather than a progressive tax, Connecticut levies a flat 12% tax on amount overs the exemption. The state does not allow for spousal portability. And it is the only state with its own gift tax.
District of Columbia. Washington, D.C.’s estate tax applies to estate assets worth more than $4.71 million, a figure that adjusts along with inflation. The D.C. estate tax is not portable, so when both spouses die only one exemption applies to the estate.
Hawaii. Hawaii’s exemption is set at $5.49 million. Anything more is subject to a progressive tax at rates from 10% to 20%. Because Hawaii’s tax is portable, when a person dies their spouse can use their exemption, allowing a couple to protect up to $10.98 million.
Illinois. The Illinois exemption is set at $4 million. The graduated tax rate goes up to 16% for taxable estates of $10.04 million and up. Illinois does not allow spousal portability.
Maine. The threshold for exemption in Maine is $6.8 million, an amount that adjusts periodically. Amounts over that are subject to tax rates ranging from 8% to 12%. Maine does not allow portability.
Maryland. Maryland is the only state with both an estate tax and an inheritance tax. The estate tax applies to estates over $5 million. The graduated tax goes up to 16% for taxable estates over $10.04 million. Thanks to Maryland’s portability rule, couples can protect up to $10 million.
Massachusetts. The exemption threshold in Massachusetts is just $2 million, and it’s not portable. The estate tax rates are progressive and go up to 16%.
Minnesota. Minnesota’s exemption of $3 million is not portable. Tax rates start at 13% and go up to 16%.
New York. New York’s estate tax applies once an estate is valued at more than $6.94 million, an amount adjusted periodically. In a wrinkle, once a New York estate reaches 105% of the threshold, the entire estate is taxable rather than only the amount over the threshold (called the estate tax “cliff”). Rates start at 3.06% and go up to 16%. New York also doesn’t provide for portability.
Oregon. The lowest threshold for exemption is in Oregon, where anything over $1 million is taxed at rates from 10% to 16%. Oregon also does not make its tax portable between members of a married couple.
Rhode Island. Rhode Island ties its exemption directly to a broad inflation benchmark so it adjusts annually. In 2024 the exemption was $1,774,583. The tax tops out at 16% and the exemption is not portable between spouses.
Vermont. Unlike most states that use graduated tax schedules, Vermont applies a flat 16% to amounts over its $5 million exemption. It’s not portable, and any gifts made within the last two years are included in the estate’s value.
Washington. Along with a low exemption of $2.193 million, Washington has a tax rate of up to 20%. Portability is also not allowed.
State Estate Tax Considerations
States laws regarding estate taxes change, sometimes drastically. New Jersey, for example, completely eliminated its estate tax as of 2018. Other states may adjust their exemption thresholds as often as annually. For these reasons, it’s important to check with a financial advisor knowledgeable about your state’s laws before engaging in estate planning.
Bottom Line
Some states charge estate taxes on estates that exceed a minimum threshold as low as $1 million. Tax rates can reach 20%, depending on the size of the taxable amount. States also vary in the way they allow or prohibit spouses from combining their individual exemptions to shelter larger estates.
Estate Planning Tips
- If you live in a state with estate planning taxes, a financial advisor could help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- You can plan ahead for taxes to maximize your loved ones’ inheritances. For example, you can gift portions of your estate in advance to heirs, or even set up a trust.
Photo Credit: ©iStock/Iuliia Zavalishina, ©iStock/katleho Seisa, ©iStock/fizkes