New York Estate Tax

If you're a resident of New York and leave behind more than $6.58 million (for deaths occurring in 2023), your estate might have to pay New York estate tax. The New York estate tax is different from the federal estate tax, which is imposed on estates worth more than $12.92 million (for deaths in 2023). So even if your estate isn't large enough to owe federal estate tax, it might still owe New York estate tax.

But it's not just state residents who might owe New York estate tax. If you're a nonresident but own real estate or other tangible assets (a boat or plane, for example) located in New York, your estate might also need to file a New York estate tax return.

The New York Estate Tax "Cliff"

The New York estate tax differs in one important way from the estate taxes of other states. Under the estate tax systems of other states (as well as the federal government), if an estate is large enough to be subject to the tax, it's only the amount that is over the exemption that is taxed. For example, if the exemption is $1 million, and the taxable estate is $1.5 million, then $500,000 would be subject to the estate tax.

By contrast, New York taxes the entire value of an estate that exceeds the exemption by more than 105%.

Example: If someone dies in September 2023, leaving a taxable estate of $7 million, the estate would exceed the New York exempt amount ($6,580,000) by $420,000. In other states, the estate would pay a tax based on a percentage of the excess amount ($420,000), but in New York, the estate pays a tax based on a percentage of the entire estate's value ($7 million).

Do You Need to File a New York Estate Tax Return?

If the gross estate of a New York resident has a value of more than $6.58 million, the personal representative or executor of the estate must file a state estate tax return. (Smaller estates won't need to file a return.) Your gross estate will include just about all of the property you own at your death:

• Real estate
• Bank and investment accounts—retirement and non-retirement
• Vehicles and other items of personal property
• Proceeds from any life insurance policies on your life, if you owned the policies
• Your business interests (sole proprietorship, limited liability company, or closely held corporation)
• Any property you hold in a revocable living trust

Co-owned property. If you own assets with someone else, generally only your share will be included in your estate. In other words, if you and your spouse own your house, half of its value would be included in your estate.

Nonprobate assets. Notably, your gross estate also includes non-probate assets. For example, the property you hold in a revocable living trust avoids probate, but it does not avoid estate taxes and is counted in your gross estate.

Portability. The federal estate tax regime allows a surviving spouse to use the deceased spouse's unused portion of the exemption—a feature called "portability." However, New York's estate tax does not offer portability between spouses; each spouse has a separate exemption amount of $6.58 million.

Will Your Estate Owe Estate Tax?

Even if a New York estate tax return must be filed, it doesn't necessarily mean that the estate will owe estate tax. Your estate might be able to take certain deductions that lower the value of your estate below $6.58 million, in which case no estate tax will be due. These deductions include:

• Marital deductions. Property left to a surviving spouse, no matter the amount, can be deducted from the gross estate.
• Charitable deductions. Gifts to qualified public, charitable, and religious organizations can be deducted from the gross estate.
• Debts and administration expenses. Debts owed and some administration expenses (funeral costs and attorney's fees, for example) can be deducted from the gross estate.

What Is the New York Estate Tax Rate?

If your estate owes estate tax, how much will it actually owe? In New York, the tax rate currently ranges from 3.06% to 16%. Within this range, the rate increases with the size of the estate. (Compare these rates to the current federal rate of 40%, but remember that the federal rate applies only to the portion of the estate that exceeds the federal exemption.) See Form ET-706 for a table of the exact estate tax rates for deaths in 2022.

Deadlines for Filing the New York Estate Tax Return

If a return is required, it's due nine months after the date of death. The executor can request a six-month extension to file the return and pay the tax.

Your executor will likely have to hire professional help (an experienced lawyer or CPA) to prepare the New York estate tax return. The estate's funds can be used to pay for professional fees. Estate tax forms and instructions are available at the New York Department of Taxation and Finance.

For more on estate planning issues specific to New York, see Nolo's New York Estate Planning section.