Only the estates of Ohioans who die in 2012 will have to think about paying Ohio estate tax—the tax has been repealed, effective January 1, 2013. For deaths before that date, however, estates with a total value of more than $338,333 are subject to the Ohio estate tax. This is the lowest estate tax exemption amount of any state. (Federal estate tax returns, by contrast, are required only for estates of more than $5.25 million for deaths in 2013.)
Many estates that are larger than the exempt amount don’t actually owe Ohio estate tax. For example, if the deceased person left everything to the surviving spouse, they pass free of estate tax, no matter how large the value.
If you're an executor, however, you might be required to file an Ohio estate tax return even if no tax will be due. If the value of all of the assets in the “gross estate” exceeds the exempt amount ($338,333), a return must be filed. The gross estate includes the property the deceased person owned at death, including:
- Ohio real estate (the deceased person's share, if you co-own it with someone else)
- Bank accounts and cash
- Investment accounts
- Other personal property (anything but real estate)
- Life insurance proceeds payable to your estate
- Retirement account funds
- An interest in any small businesses (whether they are sole proprietorships, limited liability companies, or small corporations)
- The value of any gifts the person made during life that are subject to the federal gift tax (generally, this means gifts of more than $13,000 to a single recipient in one calendar year)
The estate could owe Ohio estate tax even if the deceased person didn't live in the state. An executor will have to file a state estate tax return if the person owned property in Ohio—for example, Ohio real estate with a value greater than the exempt amount.
The Taxable Estate
The value of the taxable estate—the amount that’s actually taxed—is determined by taking allowed deductions from the gross estate. As mentioned, property left to the surviving spouse can be deducted (this is called the unlimited marital deduction). Other common deductions include funeral expenses, attorney’s fees, medical expenses, and real estate taxes. By the time all the deductions are subtracted, many estates don’t owe estate tax because the amount of the taxable estate is below the exempt amount.
The Ohio estate tax rate is far below the federal rate. For a taxable estate worth more than $338,333 but not more than $500,000, the rate is six percent. For amounts above $500,000, the rate is seven percent.
The Ohio Estate Tax Return
If an Ohio estate tax return is required, it must be filed 15 months after the date of death. (The official due date is nine months after death, but a six-month extension is granted automatically.) The executor must, however, pay any tax due nine months after the death; after that date, interest starts to accrue on unpaid amounts.
The Ohio department of taxation offers state estate tax forms and instructions, but preparing the estate tax return requires the help of an expert. The fee, which can be paid from estate assets, will likely be more than $1,000.