New Jersey Estate Tax

New Jersey does not collect estate taxes on deaths after 2017.

For deaths after on or after January 1, 2018, New Jersey no longer collects estate tax. However it continues to collect inheritance tax, and New Jersey residents are still subject to the federal estate tax.

The New Jersey estate tax now applies only to the estates of people who died before 2018. The tax applies only to estates valued over $2 million (for deaths in 2017) or over $675,000 (for deaths in 2001-2007).

Year of Death Exemption
2018 and beyond No estate tax
2017 $2,000,000 exemption
2001 - 2017 $ 675,000 exemption

When an Estate Tax Return Is Required

If a New Jersey resident died before 2018 and left assets with a gross value of more than $2 million (for deaths in 2017), the executor of the estate must file a New Jersey estate tax return. The New Jersey estate tax does not apply to nonresidents, even if they owned valuable New Jersey real estate or other property.

The value of the gross estate is calculated by adding up all of the assets owened at death, including:

  • Real estate in New Jersey
  • Bank accounts and certificates of deposit
  • Investment accounts and securities
  • Vehicles and other items of personal property
  • Proceeds from insurance policies on your life, unless you didn’t own the policy
  • Retirement account funds
  • Small business interests (sole proprietorship, limited liability company, or small corporation)

It doesn’t matter, for tax purposes, whether or not any of the assets go through probate at death. Real estate in a living trust, a retirement account for which the decedent has named a beneficiary, a jointly owned bank account—it all gets counted.

Some other less obvious assets are also included:

  • taxable gifts made during life (more than the federal gift tax annual exclusion amount, $14,000 per year per recipient for 2017).
  • proceeds of any life insurance policy transferred to an irrevocable life insurance trust within three years before death.

Property left to a spouse or civil union partner are exempt from state estate tax, no matter what the amount.

The Taxable Estate

The amount of the gross estate determines whether or not a tax return must be filed. The amount of the taxable estate—what’s left after you subtract allowed deductions from the gross estate—determines whether or not the estate actually owes tax.

The big deduction, for many people, is the marital deduction, which lets you subtract any amount left to the spouse. So if the decedent left the entire estate to the surviving spouse, the estate won’t owe any tax. Other deductions include attorney fees, funeral costs, and outstanding income tax bills, among others. If the deductions reduce the value of the taxable estate below $2 million (for deaths in 2017), the executor does not have to write a check for state estate tax.

The Estate Tax Return and Payment

New Jersey has two kinds of estate tax returns. There’s a simplified form for estates that don’t also have to file a federal estate tax return, and a regular estate tax return for larger estates. The simpler form is due nine months after the death. The regular form is due nine months and 30 days after the death. Any tax due must be paid when the return is due. Interest accrues on unpaid tax.

If there’s a surviving civil union partner, the estate must prepare and submit a “dummy” Form 706, prepared as though the IRS treated a surviving civil union partner just like a surviving spouse.

Both the state and federal returns are complicated, and the executor will need to hire an experienced professional to prepare them. The fee is paid from estate assets.

For information on the estate tax, see the New Jersey Treasury Department’s Division of Taxation.

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