Prior to 2014, New York had an estate tax on properties valued over $1 million. However, the law changed in 2014. The State of New York now levies taxes on property that is valued at over $5.49 million. This means that if someone’s estate is worth less than $5.49 million, no taxes will be levied on it. These taxes have to be paid through the estate itself, and they range from 3.06% to 16%.
On top of this, there is a Federal Estate Tax. It kicks in at $11.4 million. It is revised every year to maintain consistency with inflation. The Federal Estate tax goes up to 40%. However, the estate is taxed above the $11.4 amount.
Estate Tax Exemption
The New York Estate Tax features an exemption. If the estate’s value is exceeded by less than 5% of the threshold, taxes will be levied on the amount over the threshold.
Hence, if the value of your property is $5.6 million, the tax will be levied on $110,000 worth of assets. If the estate is worth $5.76 million, then taxes will be paid on all of the estate.
Estate Tax Limit
The estate tax limit in New York is 16%. There is also a limit on the amount that the estate can be taxed on. The threshold for taxes is on estates that are worth $10.1 million. Hence, no matter how much the estate’s value increases over $10.1 million, it will only be taxed at 16%.
New York Gift Tax
There is no gift tax in the State of New York. People can choose to gift their estate to a loved one or loved ones if they wish to avoid taxes on it. They can only do this before they die though. An important caveat here is that gifts made within three years before death are counted towards the estate total. Hence, you can’t give all of your money away as gifts to avoid the taxes on it.
There is a federal gift tax however, which applies to gifts that exceed the $15,000 limit. This limit, like all taxable amounts, is revised every year to keep track of inflation.
Estate Tax for Married Couples
There is a provision in the law, for married couples, which handles taxes on estates transferred to spouses. In the State of New York, and even at the federal level, there is no estate tax on property transferred to your spouse. However, when the second spouse passes away, then estate taxes are levied completely.
Couples do try to avoid this by establishing a trust which is equal to the estate tax exemption limit. For example, they split up their estate in to two or three pieces through trusts. This way, their total estate doesn’t exceed the threshold of taxation.
The New York Estate Tax is a pretty standard estate tax compared to other states.