Sunday, December 18, 2005

Beware the Snare - State Estate Tax on the Rise

Category: Estate and Inheritance Tax

Rejoice! It is almost 2006, and the federal estate tax exemption will increase from $1.5 million to $2.0 million per person - that is $4.0 per married couple with a tax advantaged estate plan. Hooray! No more taxes! ....

But wait - this is the Federal exemption from estate taxes. What about the State where you live (or own real estate)? 24 States and the District of Columbia have a State level death taxes - which are imposed by the State taxing authority, not the Federal government. Depending on the tax rates imposed by each State, your total "death tax" bill may be going up in 2006, not down.

While the Federal Exemption for Estate tax is $2.0 million, many states have a lower exemption level (including both New Jersey and New York):

If your State is not on this list, should State Estate Taxes still be a concern for you? Yes, if you own real property in any State on these lists. Real property is subject to the estate tax laws of the State in which it is located; all other property is subject to the estate tax laws of the State in which you reside.

$2 Million State Death Tax Exemption:
  • Connecticut
  • Washington

$1 Million State Death Tax Exemption:

  • District of Columbia
  • Kansas
  • Maine
  • Maryland
  • Massachusetts
  • Minnesota
  • New York
  • Oklahoma
  • Oregon
  • Tennessee

$675,000 State Death Tax Exemption:

  • New Jersey
  • Rhode Island
  • Wisconsin

Other State Death Tax Exemptions:

  • Indiana ($100,000 per beneficiary)
  • Nebraska ($10,000 per beneficiary)
  • Ohio ($338,333)
  • Pennsylvania ($3500 per household)

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