Oklahoma has no estate tax, though some Sooner State residents may pay the federal estate tax if their estate is above a certain size. This page will walk Oklahomans through the estate tax so they can better plan their estate and make sure their family is prepared to deal with their death. Working with an advisor helps to ensure that you take care of every detail when planning your estate. SmartAsset can help you find one with our free financial advisor matching service.
Oklahoma Estate Tax
Oklahoma does not have an estate tax, making it one of 38 such states.
What Is the Estate Tax?
The estate tax applies to the estate of a person who recently died, before the money and assets held in the estate are dispersed to the person’s legally designated heirs. The estate tax is sometimes also called the “death tax.” It only applies to estates that reach a certain asset threshold, which is determined by the entity or government levying the tax.
Inheritance taxes are different from estate taxes. Inheritance taxes apply to money and assets already passed to heirs, who pay the the tax on their inheritance.
Oklahoma Inheritance and Gift Tax
Oklahoma has no inheritance tax either. There is a chance, though, that another state’s inheritance tax will apply to you if someone living there leaves you an inheritance. Kentucky, for instance, has an inheritance tax that applies to all property in the state, regardless of whether the person inheriting the property lives in the state. If someone out-of-state leaves you an inheritance, check local laws so you don’t end up having to deal with the consequences of a missed tax payment.
Oklahoma also has no gift tax. The federal gift tax has a $15,000 yearly limit for each gift recipient. If you gift one person more than $15,000 in a year, you must report that to the IRS. The amount exceeding the limit counts against your lifetime gift tax exemption of $11.18 million. It also decreases your federal estate tax exemption.
Federal Estate Tax
Though Oklahoma has no estate tax, the federal estate tax will apply to Sooner State residents with large enough estates. The federal estate tax has an exemption of $11.18 million for 2018. The exemption will increase to $11.40 million in 2019. This exemption is portable, meaning that one spouse can pass their exemption to the other. Collectively, a married couple can protect up to $22.36 million of their estate.
Any estate with value exceeding the exemption is subject to a progressive estate tax. The top rate is 40%.
Here is an example: Let’s say your estate is worth $20 million and you are not married. Subtracting the exemption, you have a taxable estate of $8.82 million, placing you in the top tax bracket. You owe $345,800 on the first $1 million. You also owe 40% of the remaining $7.82 million, which comes out to $3.128 million. Add back the base payment and you’ll get the total tax burden, which is $3,473,800.
|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 $11.18 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Oklahoma Tax Picture
Oklahoma is a tax-friendly state for retirees. The state does not tax Social Security benefits. It only partially taxes income from private and public pensions and retirement accounts, including 401(k) plans and IRA plans. This income is taxed, but a $10,000 deduction applies to all retirement income other than Social Security benefits. If your total income is less than the deduction, you’ll pay no tax. The income tax in Oklahoma is progressive, with rates ranging from 0.50% to 5.00%.
Oklahoma has low property taxes. The average effective rate is just 0.89%. People age 65 and older who own and occupy a home and have a household income of no greater than $67,300 are eligible for a freeze on increases in the property value of their home. This can lead to tax savings as a home’s actual value goes up. There is also a homestead exemption in Oklahoma that knocks $1,000 off the taxable value. This is available to any Oklahoma resident who owns and occupies their home.
The statewide sales tax in Oklahoma is 4.50%. With local rates included, the total sales tax averages a very high 8.90%.
Estate Planning Tips
- Hiring a financial advisor makes estate planning much easier. Find one with SmartAsset’s free financial advisor matching service. You answer a few questions and we match you with up to three fully vetted and disclosure-free advisors in your area. After you’re matched, you can talk with each of them and make a decision about how you want to proceed.
- Don’t forget to update your estate plan. As your life and your financial situation changes, you’ll want to appropriately update your plan to reflect those changes.
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