President Trump has vowed to repeal the federal estate tax, and the Republican-controlled Congress generally supports this proposal.
Strategy: Don’t ignore state death taxes. Currently, 14 states and Washington, D.C., impose estate taxes, and six impose inheritance taxes. Two states—New Jersey and Maryland—have both.
However, things are looking up for wealthy residents of certain states.
Here’s the whole story: Over the years, the federal estate tax exemption was gradually raised by Congress—from $675,000 to $5 million (indexed to $5.49 million for 2017). While some states moved in lockstep with the federal estate tax exemption, most did not. But at least nine states are revising their laws in 2017.
Notoriously, New Jersey had retained a rock-bottom estate tax exemption of $675,000. Under a new law, it is increasing the exemption to $2 million in 2017 before repealing the tax in 2018. The state inheritance tax will remain.
Some states are gradually raising estate tax exemptions. Maryland is increasing its exemption from $2 million in 2016 to $3 million in 2017 to $4 million in 2018; Minnesota from $1.6 million to $1.8 million to $2 million.
In New York, the current exemption of $4.81 million goes to $5.25 million on April 1, 2017, and then matches the federal estate tax exemption on Jan. 1, 2019.
Rhode Island (current exemption of $1.5 million) and Washington ($2.079 million) are scheduled to inflation-index their exemption amounts in 2017.
Other states—including Delaware, Hawaii and Maine—are matching the federal $5.49 million exemption in 2017.
Tip: Washington, D.C., is raising its $1 million exemption to $2 million. It will then match the federal exemption amount, but only if it has a surplus of tax revenue.
- Small Business Tax Deduction Strategies No matches