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Washington, DC estate tax

Washington, D.C. does levy an estate tax on the estates of certain people after they have died. Specifically, the D.C. estate tax applies to any estate worth more than $4 million starting in 2021. In 2020, the threshold was $5.7642 million. For anyone who died prior to 2021, the rate of the estate tax is graduated and runs from 12.0% to 16.0%. Estate planning isn’t easy, and if you are planning for your estate or dealing with the estate of a loved one, you may need some help. Consider finding a financial advisor to help you using SmartAsset’s free financial advisor matching tool.

Washington, D.C. Estate Tax Exemption

In 2020, Washington, D.C. lowered its estate tax exemption to $4 million. Previously, it stood at $5,764,200. This means that if a person dies in 2021, any money in his or her estate in excess of $4 million will be subject to the estate tax. If the person died in 2020, it only applies to money in excess of $5,764,200. The estate tax exemption in D.C. is not portable between spouses. When the second of two spouses dies, that person can only apply his or her $4 million exemption, not that plus the $4 million exemption the deceased partner was entitled to.

Washington, D.C. Estate Tax Rate

The estate tax rate in D.C. is progressive, meaning that the rate goes up as the size of the estate increases. The estate tax brackets for 2021 have not yet been published. For this reason, we’ll be presenting here the brackets from the 2020 tax year, which still apply if the person who died passed away in 2020. The major difference, though, is that prior to 2021, the threshold for the estate tax was $5,764,200, while for people dying in 2021, it will be just $4 million. Still, we can use the 2020 numbers to show how calculating an estate tax burden works.

For 2020, the estate tax in Washington, D.C. ranged from 12.0% to 16.0%. The table below shows all of the rates. To figure out how much you will owe, first you’ll need to find your total taxable estate above the threshold in the first column of the chart below. In the second column, you can find the base taxes on money below your bracket. The third column shows the marginal rate you pay. Multiply that rate by any wealth above your tax bracket’s lower threshold. Add that number to the base taxes and you have the total you owe for the Washington, D.C. estate tax.

Here’s an example: Let’s say your total estate is worth $9.5 million. Subtracting the $5,764,200 exemption, you have a taxable estate of $3,735,800. Next, find where that number falls on the chart. The base taxes for the bracket is $436,512. The bottom of the threshold is $3,237,600, so we subtract that from $3,735,800 and get $498,200. That amount multiplied by the marginal rate of 15.2% is $75,726. When we add that number to the base taxes ($436,512), we get a total tax of $512,238 owed on a $9.5 million estate.

WASHINGTON, D.C. ESTATE TAX RATES
Taxable Estate* Base Taxes Paid Marginal Rate Rate Threshold**
$0-$237,600 $0 12.0% $0
$237,600-$1,237,600 $28,512 12.8% $237,600
$1,237,600-$2,237,600 $156,512 13.6% $1,237,600
$2,237,600-$3,237,600 $292,512 14.4% $2,237,600
$3,237,600-$4,237,600 $436,512 15.2% $3,237,600
$24,237,600+ $588,512 16.0% $4,237,600

*The taxable estate is the total above the exemption of $1 million.
**The rate threshold is the point at which the marginal estate tax rate goes into effect.

What Is the Estate Tax?

Washington, DC estate tax

The estate tax is levied against some estates after someone has died but before the money passes on as directed in the deceased’s will or other legal documents. It generally only applies to estates worth a certain amount as determined by the state government levying the tax. The federal government also has an estate tax.

The estate tax is not the same as the inheritance tax, which is paid by someone receiving money from a person who recently died after they’ve gotten the money.

Washington, D.C. Inheritance Tax and Gift Tax

There is no inheritance tax in Washington, DC. If you are getting money from someone who lived outside of D.C. when he or she died died, though, check local laws. In Kentucky, for instance, all in-state property is subject to the inheritance tax even if the person taking ownership lives elsewhere.

D.C. also does not have a gift tax. The federal gift tax kicks in at $15,000 in annual gifts.

Washington, D.C. Estate Tax for Married Couples

The Washington, D.C. estate tax is not portable between couples. When both spouses die, only one exemption is applied to the estate.

Federal Estate Tax

The federal estate tax has a much higher exemption level than the D.C. estate tax. The estate tax exemption for 2021 is $11.7 million. Unlike the D.C. estate tax exemption, the federal exemption is portable between spouses. This means that with the right legal steps, a married couple can protect up to $23.4 million upon the death of both spouses.

If an estate tax exceeds that amount, the top tax rate is 40%. A full chart of federal estate tax rates is below. By following the same method described in the D.C. Estate Tax section, you can use the table below to figure out your federal estate tax burden.

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 exemption of $11.7 million.
**The rate threshold is the point at which the marginal estate tax rate goes into effect.

Overall Washington, D.C. Tax Picture

Washington, DC estate tax

Washington, D.C. is moderately tax-friendly for retirees. Social Security payments are not taxed, but withdrawals from retirement accounts are fully taxed. The income tax in Washington, D.C. ranges from 4.00% to 8.95%. If you are moving to Washington and want to figure out your take home pay, use the paycheck calculator from SmartAsset.

The average property tax in the District is 0.55%, and sales tax sits at 6%.

Resources for Estate Tax Help

  • If the estate tax seems overwhelming, you should consider finding a financial advisor to help you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool connects you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors, get started now.
  • If you have a sizable estate, estate taxes on either the state or federal level could be hefty. However, you can easily 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.com/vistoff, SmartAsset, ©iStock.com/kupicoo

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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