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Estate Tax 2014

Estate Tax 2013

The Estate Tax is a tax on your right to transfer property at your death.

Despite the dysfunction and last minute deals surrounding the fiscal cliff, Congress actually came up with a pretty good solution, at least for the Estate Tax, in the American Taxpayer Relief Act passed in the early hours of 2013.

The federal estate tax exemption is set at $5,340,000 per person in 2014. Any amount given by an individual before and/or upon their death over this amount will incur federal gift or estate taxes.

A 40% tax rate then kicks in for the remainder of your estate above the threshold.

These changes mean that only the very rich need worry about the federal estate tax. However, many more people may still get caught by state estate taxes.

The following states have an estate tax. You can also see their exemption amount and their top tax rate:

  • Connecticut – exemption amount $2 million, top tax rate 12%
  • Delaware – exemption amount $5.25 million, top tax rate 16% (Delaware’s estate tax has been repealed effective July 1, 2013)
  • Hawaii – exemption amount $5.25 million, top tax rate 16%
  • Illinois – exemption amount $4 million, top tax rate 16%
  • Maine – exemption amount $2 million, top tax rate 12%
  • Maryland – exemption amount $1 million, top tax rate 16%
  • Massachusetts – exemption amount $1 million, top tax rate 16%
  • Minnesota – exemption amount $1 million, top tax rate 16%
  • New York – exemption amount $1 million, top tax rate 16%
  • New Jersey – exemption amount $675,000, top tax rate 16%
  • North Carolina – exemption amount $5.25 million, top tax rate 16%
  • Oregon – exemption amount $1 million, top tax rate 16%
  • Rhode Island – exemption amount $910,725, top tax rate 16%
  • Vermont – exemption amount $2.75 million, top tax rate 16%
  • Washington – exemption amount $2 million, top tax rate 19%
  • Washington, D.C. – exemption amount $1 million, top tax rate 16%

The following states have an inheritance tax that could affect you. Inheritance tax is largely governed by the relationship between the deceased and the heir:

  • Indiana – exemption amount $25,000, top tax rate 20% (Indiana’s inheritance tax has been repealed effective January 1, 2022. A gradual phase-out begins January 1, 2014)
  • Iowa – no exemption amount, top tax rate 15%
  • Kentucky – exemption amount $500, top tax rate 16%
  • Maryland – exemption amount $150, top tax rate 10%
  • Nebraska – exemption amount $10,000, top tax rate 18%
  • New Jersey – no exemption amount, top tax rate 16%
  • Pennsylvania – no exemption amount, top tax rate 15%
  • Tennessee – exemption amount $1.25 million, top tax rate 9.5% (Tennessee’s inheritance tax has been repealed effective January 1, 2016 with a phase-out beginning with the 2014 tax year)

While you’re planning for the future, don’t forget about the past. One of the most important ways to make sure you’re on sound financial footing for the years to come is to file all your past year taxes. If you’re missing a year or two, PriorTax can help.

Photo via why tee on Flickr.

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