Sunday 10 December 2017

Death and Taxes: The 15 States With the Highest Death Tax Rates in America

In life, the only certainties are death and taxes. And with President Donald Trump pushing for tax reform, taxes are in the news as much as ever. One of the buzzwords the congressmen and senators working on the legislation love to bring up are estate and inheritance taxes, also known as “death taxes.”
There’s no doubt people hate paying taxes (who wants to give up their hard-earned money?) and they come up with creative ways to avoid paying. Paying when you’re dead sounds lousy, but the Center on Budget and Policy Priorities notes that just 2 of every 1,000 estates (0.002%) is actually impacted by the $5.49 million federal estate tax. On top of the federal estate tax, a fraction of the states actually impose their own death tax. The long and short of it is, you need to be a very wealthy person in a select few states to be affected. However, that federal estate tax is in play no matter where you live. We are discussing states that take a little something extra.
The government still wants its cut of your money even when you’re dead. These are the 15 states taking the most estate taxes. We’ll start at the low end, reach some middle ground, and then head to the state taking the most.

15. Connecticut 

  • Estate tax rate: 12%
Our first state on the list is similar one way to almost all the others in one way: It has a progressive scale that determines the estate tax rate. On the low end, the rate is 7.2%. The tax kicks in for estates valued at $2 million or more. It caps out at 12%, according to data from the Tax Foundation. 

14. Maine 

  • Estate tax rate: 12%
Estates valued at the federal threshold of $5.49 million and up to $8.49 million are charged 8% in Maine. It’s not until you get up to $11.49 million that the 12% rate kicks in. In the middle is a $240,000 tax plus 10% of anything between $8.49 and $11.49 million. 

13. Hawaii 

  • Estate tax rate: 15.7%
The maximum rate in Hawaii comes in at 15.7% for an estate valued at $5.49 million or more. In a neat twist, Hawaii doesn’t charge descendants any income tax on money inherited from an estate worth less than that. The thinking is, earning money that way is not an everyday, run-of-the-mill kind of way of doing things. Hence, no income tax is taken. 

12. Delaware 

  • Estate tax rate: 16%
This death tax is going the way of the Dodo very shortly. The first day of 2018 sees Delaware doing away with its estate tax. Until it goes away for good, the variable estate tax rate maxes out at 16% and only applies to estates valued at $10.04 million or more

11. Illinois 

  • Estate tax rate: 16%
Illinois imposes an estate tax starting at anything valued at $4 million, so you can be charged even if the estate comes in under the federal threshold. It’s a sliding scale and only the most valuable estates have 16% taken by the state. But even that lower threshold of taxation is doing little to stem the Illinois budget crisis

10. Maryland s

  • Estate tax rate: 16%
Maryland is in the process of slowly adjusting its estate tax numbers. For 2017, it kicks in at $3 million. It will go up to $4 million in 2018, and thereafter it will mirror the federal exemption level. The is one of two states on this list (we’ll get to the other in a minute) that have an estate tax and an inheritance tax on the books. Any money you inherit, even if it’s a $10 dollar bill, is subject to the state inheritance tax as there are no exemptions. 

9. Massachusetts 

  • Estate tax rate: 16%
Estate taxes, or at least the math, doesn’t get any easier than it does in Massachusetts. If the estate you leave behind is valued at $1 million or less, there are no taxes taken. Above $1 million, it’s a sliding scale topping out at 16%. 

8. Minnesota 

  • Estate tax rate: 16%
Like we saw a minute ago with Maryland, Minnesota is adjusting its estate tax numbers. What was originally a $1.8 million threshold for 2017 was retroactively moved to $2.1 million. The amount that triggers the estate tax will increase by $300,000 until it reaches $3 million. Minnesota will miss out on quite the payday, much to the governor’s discontent. In 2016, it took in $183.2 million in estate tax revenue

7. New Jersey

  • Estate tax rate: 16%
Remember when we visited Maryland and mentioned just one other state has both estate and inheritance taxes? Well, New Jersey is that state, at least for the time being. Former governor Chris Christie might be one of the most hated governors of all time, but wealthy New Jerseyans might have done a dance when he axed the estate tax in 2016. It will be gone as of 2018. The inheritance tax is still alive, but money left to grandparents, parents, spouses, or children is exempt. Even then, only gifts over $25,000 are taxed. 

6. New York 

Estate tax rate: 16%
Tax codes are always changing, and in New York in 2014 the estate tax underwent some big changes. Starting that year, scheduled increases raised the exemption threshold to $5.25 million through 2018. After that, it will mirror the federal threshold. The progressive rate maxes out at 16%.

5. Oregon

  • Estate tax rate: 16%
Among states on this list, Oregon has one of the lowest thresholds that kick in the estate tax. It starts at $1 million taxed at 10%, and the rate steadily increases, maxing out at a 16% rate.

4. Rhode Island 

  • Estate tax rate: 16%
We’ve seen this story before on this list. Rhode Island’s threshold to enact the estate tax keeps going up. It increased to $1,515,156 million at the start of 2017. Like most of the other states we’ve seen, it’s a progressive tax and the highest rate of 16% applies only to the largest estates. 

3. Washington, D.C. 

  • Estate tax rate: 16%
Like anything tax-related, there are many ins and outs when it comes to the estate tax in Washington, D.C. One law firm made a handy chart to track it all, but the simplistic version is D.C. estates valued at $2 million or less pay no additional taxes. It’s the estates worth $10 million or more than pay at the 16% rate. Soon, the district’s exemption level will match the federal level. 

2. Vermont s

  • Estate tax rate: 16%
Vermont is different from the other states taxing estates at 16% in one major way: It’s not a progressive rate. All estates valued at $2.75 million or more must fork over 16%. And there’s a lot that goes into factoring that value. Real estate, vehicles, bank accounts, retirement accounts, and life insurance policies are all assets that determine how much a Vermont estate is worth. 

 1. Washington 

  • Estate tax rate: 20%
This is it, the state that taxes your estate the most (depending on how much it’s worth). Anything less than $1 million? You’re in the clear; the state won’t take anything. But the tax rate quickly jumps up to 14% for anything between $1 million and $2 million, and it increases all the way to 20% for anything worth $9 million or more. And that’s after you have to pony up $1.49 million. For the sake of argument, let’s look at Amazon CEO Jeff Bezos. He is worth an estimated $98 billion. If he didn’t do anything to shelter his estate from taxation, the tax bill would equate to roughly $19,601,419,000.

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