Nevada does not have an estate tax. There is a federal estate tax, though, that may apply if your estate is large enough. This guide will walk Silver State residents through the estate tax information they need to know to make sure their estate planning process goes smoothly and their family is adequately prepared for what happens once they’ve died. If you’re starting to think about estate planning, it may make sense to find a financial advisor to guide you through the trickier parts of the process. SmartAsset can help you find one with our free financial advisor matching service.
Nevada Estate Tax
Nevada is one of 38 states that does not levy an estate tax.
What Is the Estate Tax?
Governments levy the estate tax on the estate of a person who recently died. The tax applies before the assets in the estate are passed on to a person’s heirs. It is sometimes called the “death tax.” Estate tax only applies to estates that are worth more than a threshold that’s legally determined by the government levying the tax.
Make sure not to confuse the estate tax with the inheritance tax, which is different. Inheritance tax applies to money already passed on to a person’s heirs.
Nevada Inheritance and Gift Tax
Nevada does not levy an inheritance tax. However, you should know that the inheritance tax of another state may apply to you if someone living in that state leaves you something in their will. Kentucky, for instance, has an inheritance tax that applies to all property located in-state, even if the person inheriting the property is located out-of-state. If someone in another state leaves you an inheritance, check local laws to see if you’ll owe taxes so you don’t end up missing a tax payment.
Nevada also has no gift tax. There is a federal gift tax with an exemption of $15,000 per year for each gift recipient. If you gift one person more than $15,000 in a year, you must report that gift to the IRS. The excess counts against your $11.18 million lifetime gift tax exemption. It also decreases your federal estate tax exemption.
Federal Estate Tax
Nevada does not have an estate tax, but the federal government has an estate tax that may apply if your estate has sufficient value. The federal estate tax exemption is $11.18 million for 2018. It will increase to $11.40 million in 2019. The exemption is portable, meaning that one spouse can pass his or her exemption to the other so that both spouses’ exemptions apply when the second spouse dies. With the right legal maneuvers, a married couple can protect up to $22.36 million.
The estate tax is progressive for estates that are worth more than the federal exemption. The top tax rate is 40%.
Here’s an example, using the table of rates below. Take an estate worth $17 million. Subtract the $11.18 million exemption and you have a taxable estate of $5.82 million. This puts you in the top tax bracket and means you’ll have a base payment of $345,800 on the first $1 million. You’ll also owe 40% of the remaining $4.82 million, which comes to $1.928 million. Add that to the base payment, and you are left with a total federal estate tax burden of $2,273,800.
|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 federal exemption of $11.18 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Nevada Tax Picture
Nevada is very tax-friendly for retirees. The state does not tax Social Security benefits. It also doesn’t tax withdrawals from retirement accounts, like 401(k) plans, or income from pensions, whether private or public. In fact, Nevada does not tax any income. Thus, you won’t pay state income taxes on retirement income or any money you continue to earn from post-retirement gigs if you spend your golden years there.
Nevada also has very low property tax. The average effective rate is just 0.77%. There is no senior homestead exemption, but there are some programs that retirees may be able to take advantage of. This includes a program for veterans, a program for blind people and another for surviving spouses.
Sales tax in Nevada is relatively high. The statewide rate is 6.85%. The average total rate statewide is 7.98%, taking into consideration local rates.
Estate Planning Tips
- Estate planning takes time and energy. You may need a professional to get you on track. SmartAsset can help you find that professional with our free financial advisor matching service. You just answer a short questionnaire about your finances. Then, we match you with up to three advisors in your area. We fully vet all of our advisors and they are free of disclosures. You can then talk with each of your advisor matches to see if one of them is a good fit for you.
- One common estate planning mistake is forgetting about certain assets. There is more than your bank account to worry about. You should also include real estate, cars and jewelry.
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