The state of Ohio does not have an estate tax. There is a chance that you may still be subject to the federal estate tax. This guide has all the information you need to start estate planning in the Buckeye State. If you think you’ll need help, it can’t hurt to speak to a professional. SmartAsset’s SmartAdvisor platform can help you find a financial advisor in your area.
Ohio Estate Tax
Ohio is one of 38 states that doesn’t tax estates, regardless of size.
What Is the Estate Tax?
The estate tax is sometimes called the “death tax,” but all official government entities use the term estate tax. It is a tax levied on the estate of a recently deceased person before the money is passed on to their heirs.
The estate tax is different from the inheritance tax, which is levied on a person’s heirs after they have received an inheritance.
Ohio Inheritance Tax and Gift Tax
There is no inheritance tax in Ohio. However, other states’ inheritance tax may apply to you as an Ohio resident. For instance, in Pennsylvania, the inheritance tax applies to out-of-state heirs if the deceased lived in the state. If you’ve inherited money, you should check local laws to see if you’ll owe inheritance tax to another state.
Ohio also has no gift tax, meaning the only gift tax that may apply to you is the federal gift tax. The gift tax exemption for 2022 was $16,000 per person per year. In 20223that increases to $17,000. Gifting more than that to a single person in one year will reduce your lifetime exemption of $12.92 million.
Federal Estate Tax
Even though there is no Ohio estate tax, you may still owe estate tax to the federal government. The federal estate tax kicks in at $12.06 million for 2022, increasing to $12.92 million for deaths in 2023. This tax is portable for married couples. This means that with the right legal steps, a married couple’s estate won’t have to pay federal estate tax on up to $25.84 million when both spouses die as of 2023.
A full chart of federal estate tax rates is below.
Here’s an example of how it works: Let’s say your estate is worth $26.74 million and you aren’t married. The estate tax exemption is $12.92 million, so subtracting that from $26.74 million leaves you with a taxable estate of $13.82 million. If you consult the chart, you’ll see you are in the highest bracket. Your base tax payment on the first $1 million is $345,800. You also pay 40% on the remaining $12.82 million, which comes to $5.128 million. That ($5.128 million), plus the base tax payment of $345,800, means your total tax burden is $5,473,800.
|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 $12.92 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Ohio Tax Picture
Ohio has a progressive income tax rate, ranging from 0% to 3.99%. Depending on where you live, there are additional local income taxes of up to 3%. You can use our Ohio paycheck calculator to determine your take home pay. The state is moderately tax-friendly for retirees: Social Security is not taxed, while retirement plan withdrawals are partially taxed. Pensions are also partially taxed.
The sales tax in the state is 5.75% statewide, with local taxes of up to 2.25%. The average effective property tax rate in Ohio is 1.41%, higher than the national average.
Estate Planning Tips
- If you think you need help with estate planning or any other financial planning questions, a financial advisor can help you make sure you’re on the right track. 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 interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Make sure to think about and account for all of your financial assets when you are planning your estate. This includes any retirement plans you have, like a 401(k) plan through your employer.
- One major part of planning your estate is writing a will. Make sure you work with a lawyer to avoid common will mistakes like not following all the rules, not naming an executor for your estate or not naming a guardian for any minor children.
Photo credit: ©iStock.com/kali9, SmartAsset, ©iStock.com/aceshot