There is no estate tax in Utah. There is a federal estate tax, though, and residents of the Beehive State with sufficiently large estates may have to pay that. This guide is for Utahns who are starting to think about estate planning and want to learn more to ensure they protect their assets and prepare their families. If you want help with estate planning or financial planning more generally, consider working with a financial advisor. SmartAsset can help you find one with our free financial advisor matching service.
Utah Estate Tax
Utah is one of 38 states with no estate tax.
What Is the Estate Tax?
The estate tax, sometimes called the “death tax,” is a tax levied on the estate of a person who has recently died. It applies to the money and assets in an estate before they are dispersed to a person’s designated heirs. Only estates that reach a legally defined threshold are subject to the estate tax.
The inheritance tax is different from the estate tax. The inheritance tax applies to money after it has been passed on to beneficiaries, who are responsible for paying the tax.
Utah Inheritance and Gift Tax
Utah does not levy an inheritance tax. However, inheritance laws from other states may apply to you if someone from a state with an inheritance tax leaves you something. Pennsylvania, for instance, has inheritance laws that apply to out-of-state inheritors. Check local laws if you inherit money or property from someone living out of state. It’s always better to check than to find out later that you should have paid a tax bill and didn’t.
Utah does not have a gift tax. There is a federal gift tax exclusion of $16,000 per receiver per year for 2021, increasing to $16,000 in 2021. If you gift one person more than $16000 in a year, you must report it to the IRS. The gift in excess of $16,000 will reduce your lifetime exemption of $12.06 million and your federal estate tax exemption.
Federal Estate Tax
Though Utah has no estate tax, there is still a federal estate tax to think about. If your estate is large enough, the federal government may tax your estate after you die. There is an $11.70 million exemption for the federal estate tax in 2021, which increase to 12.06 The exemption is portable for married couples. This means that when both spouses die, they can protect up to $24.12 million in their estate with the right legal steps.
Any estate exceeding the exemption will owe estate tax. The top rate is 40%. See a full table of rates below.
Here’s how to figure out how much you’ll owe. Let’s say your total estate is worth $13.88 million and you are not married. First, subtract the $12.06 million exemption. That leaves a taxable estate of $1.82 million. You are therefore in the top tax bracket and will owe $345,800 on the first $1 million. You’ll also owe 40% on the remaining $820,000, which comes to $328,000. Add that to the base rate and you have a total tax burden of $673,800.
|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 $12.06 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Utah Tax Picture
Utah’s retirement tax-friendliness is a mixed bag. It fully taxes Social Security payments and withdrawals from retirement accounts. Income from private and public pension plans is also taxable, though the state offers a tax credit of up to $450. Utah has a flat income tax of 4.95%.
Property taxes are lower than the national average, with an average effective rate of just 0.58%. There is also a homestead exemption that protects 45% of the value of all homes from property tax. Seniors aged 66 and up who have household incomes of less than $34,666 (in 2021) can get an abatement of up to $1,067, based on income.
Utah’s statewide sales tax rate is 6.10%. The average sales tax is 7.19%, including local rates, placing it in the middle of the pack nationwide.
Utah has very high sin taxes. This includes an alcohol tax adding up to more than $12 per gallon of liquor.
Estate Planning Tips
- Estate planning, like any type of financial planning, isn’t easy. Working with a financial advisor can make it easier. SmartAsset can help you find the right advisor for you with our free financial advisor matching service. You answer a few questions and we match you with up to three advisors, all fully vetted and free of disclosures. Then you talk to each advisor and see if one of them is a good fit for you.
- As you’re planning your estate, think about the end of your life as well. You may want to consider drafting a living will. A living will provides instructions for matters like medical care when you can no longer make decisions. Be sure to choose someone you trust to have power of attorney and make medical decisions on your behalf, if it comes to that.
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