No Estate Tax States [Updated May 2023] (2024)

FAQs

No Estate Tax States [Updated May 2023]? ›

The states with no state estate tax as of mid-2023, are Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, ...

Effective January 1, 2023, the federal gift/estate tax exemption and GST tax exemption increased from $12,060,000 to $12,920,000 (an $860,000 increase). [1] The federal annual exclusion amount also increased from $16,000 to $17,000.

If you die as a resident of certain parts of the country, your estate may also be subject to a state tax. As of 2023, Washington, Oregon, Minnesota, Illinois, Maryland, Vermont, Connecticut, New York, Rhode Island, Massachusetts, Maine, Hawaii and the District of Columbia all levy estate taxes.

The annual exclusion amount for 2023 is $17,000 ($34,000 per married couple). That means you could give up to $17,000 (or a married couple could give a total of $34,000) in annual exclusion gifts to any child, grandchild or other person.

In addition, the estate and gift tax exemption will be $12.92 million per individual for 2023 gifts and deaths, up from $12.06 million in 2022. This increase means that a married couple can shield a total of $25.84 million without having to pay any federal estate or gift tax.

Beginning on January 1, 2026 the exemption will fall back to 2017 amounts of $5 million adjusted for inflation. The IRS has issued final regulations under IR-2019-189 that there will be no “clawback” for gifts made under the increased estate and gift tax lifetime exemption.

As of January 1, 2026, the current lifetime estate and gift tax exemption of $12.92 million for 2023 will be cut in half, and adjusted for inflation. Families that may face estate tax liability in 2026 may benefit from transferring assets and their appreciation out of their estate sooner rather than later.

Massachusetts and Oregon have the lowest exemption levels at $1 million, and Connecticut has the highest exemption level at $9.1 million. Of the six states with inheritance taxes, Nebraska has the highest top rate at 18 percent. Maryland—which also has an estate tax—imposes the lowest top rate at 10 percent.

The states with no state estate tax as of mid-2023, are Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, ...

A major reason Hawaii has low property taxes is that it offers generous exemptions on owner-occupied residences. Homeowners are eligible for exemptions ranging from $80,000 to $160,000, depending on their county of residence.

How much money can a parent gift a child in 2023? ›

As of January 2023, the annual gift tax exclusion amount has increased to $17,000. That is the amount you can gift to any one person each year free of any tax implications. For years the amount was set at $10,000, but since 2002 it has been slowly increasing.

One of the biggest disadvantages of a Generation-Skipping Trust is the fact that they are considered Irrevocable Trusts. This means you do not have the power to amend or cancel them. The assets contained within the Trust will also no longer be under your control, and will instead be administered by a Trustee.

What Triggers the Generation-Skipping Transfer Tax? The generation-skipping transfer tax is triggered when a person gifts another person an asset but skips a generation in doing so. For example, when a person gifts a home to their grandchild and skips their child.

There is no federal inheritance tax, but there is a federal estate tax. The federal estate tax generally applies to assets over $12.06 million in 2022 and $12.92 million in 2023, and the estate tax rate ranges from 18% to 40%.

The primary way the IRS becomes aware of gifts is when you report them on form 709. You are required to report gifts to an individual over $17,000 on this form. This is how the IRS will generally become aware of a gift.

Applying the most recent 8.5% inflation rate, the year 2024 federal estate and gift tax exemption becomes roughly $14,197,333 per person. This becomes $28,394,666 for a married couple.

Those rates—ranging from 10% to 37%—will remain the same in 2023. What's changing is the amount of income that gets taxed at each rate. For example, in 2023, an unmarried filer with taxable income of $95,000 will have a top rate of 22%, down from 24% in 2022.

Long-term capital gains tax rates for the 2023 tax year

In 2023, individual filers won't pay any capital gains tax if their total taxable income is $44,625 or less. The rate jumps to 15 percent on capital gains, if their income is $44,626 to $492,300. Above that income level the rate climbs to 20 percent.

If you inherit property or assets, as opposed to cash, you generally don't owe taxes until you sell those assets. These capital gains taxes are then calculated using what's known as a stepped-up cost basis. This means that you pay taxes only on the appreciation that occurs after you inherit the property.

The estate tax exclusion has increased to $12.06 million. This is the amount one person can pass gift and estate tax free during their life or upon death. With proper trust provisions, a married couple could pass $24.12 million.

What is the generation skipping tax exemption for 2026? ›

What we do know with certainty is that the gift, estate and generation-skipping transfer tax exemptions are currently scheduled to be reduced to $5 million per person ($10 million for married couples), plus indexing, starting in 2026.

Most provisions, including personal income tax rates and brackets, expire at the end of 2025 unless Congress acts. The 21% corporate tax rate and long-term capital gains tax rates do not expire.

1. Alaska. Alaska is the most tax-friendly state for retirees because it has no state income tax or tax on Social Security. And its sales tax rate is the fourth lowest on our list - fifth lowest in the U.S. But keep this in mind: The cost of living in Alaska is higher than in most states.

In 2020, the average American contributed 8.9% percent of their income in state taxes. Alaska had the lowest average overall tax burden – measured as total individual taxes paid divided by total personal income – at 5.4%, followed by Tennessee (6.3%), New Hampshire (6.4%), Wyoming (6.6%) and Florida (6.7%).

All of the data below comes from the Census Bureau's 2021 1-year American Community Survey (ACS) Estimates. Hawaii has the lowest property tax rate in the U.S. at 0.27%. The Aloha state has a home median value of $722,500.

The lowest state exemptions in tax year 2022 were $1 million in Oregon and Massachusetts. The highest exemptions were in Connecticut ($9.1 million), New York ($6.11 million), Maine ($6.01 million), Hawaii ($5.49 million) and Maryland and Vermont (both $5 million).

From this perspective, you should gift as much as you can comfortably afford during your lifetime, while remaining aware of the capital-gain-basis step-up available for inherited assets. So, gift your assets that have minimal gains and save your most appreciated assets for inheritance.

The basic home exemption for homeowners 70 years of age or over is $100,000. In addition to the basic exemption amount, an additional exemption of 20 percent of the assessed value of the property is also applied to reduce the net taxable value.

These states, all in the Northeast, had the highest average property taxes on single-family homes in 2022: New Jersey ($9,527) Connecticut ($7,671) Massachusetts ($7,044)

How to avoid Hawaii estate tax? ›

The Hawaii estate tax exemption, like the federal exemption, is a tax exemption that reduces the amount of estate taxes that must be paid. At the state level, the exemption is $5,490,000; in other words, you will pay no Hawaii estate tax on estate transfers up to that value.

Lifetime Gifting Limits

Each individual has a $11.7 million lifetime exemption ($23.4M combined for married couples) before anyone would owe federal tax on a gift or inheritance. In other words, you could gift your son or daughter $10 million dollars today, and no one would owe any federal gift tax on that amount.

There is no limit to the number of recipients you can give a gift to. There is also a lifetime exemption of $12.92 million. Even if you gift someone more than $17,000 in one year, you will not have to pay any gift taxes unless you go over that lifetime gift tax limit.

As of 2022, any gift under $16,000 isn't typically subject to gift tax and doesn't need to be reported to the IRS. This is due to the annual gift tax exclusion. It was $15,000 in 2021, but has increased to $16,000 for 2022 — as it's usually adjusted each year for inflation.

While trusts are highly structured, they do not protect your assets from creditors seeking restitution. In fact, creditors can file a claim against the beneficiaries of the estate should they learn of the person's passing.

The major disadvantages that are associated with trusts are their perceived irrevocability, the loss of control over assets that are put into trust and their costs. In fact trusts can be made revocable, but this generally has negative consequences in respect of tax, estate duty, asset protection and stamp duty.

Traditionally, the rule against perpetuities states that a trust can last 21 years past the death of the last beneficiary. However, many states have opted out of the rule, allowing trusts to continue for many generations. The downside of dynasty trusts is that they are inflexible.

Generation-Skipping Trust and Taxes

As a result, generation-skipping trust distributions above the exemption threshold are subject to a 40% GST tax in addition to any state inheritance or estate taxes that may apply. In 2023, the exemption rates are $12.92 million for individuals and $25.84 million for couples.

The federal estate tax applies to the transfer of property at death. The gift tax applies to transfers made while a person is living. The generation-skipping transfer tax is an additional tax on a transfer of property that skips a generation. The United States has taxed the estates of decedents since 1916.

Any distributions from a GST trust is subject to the 40 percent GST tax in addition to the general 40 percent gift and estate tax. Luckily, the current threshold is at $11.7 million. Unless you're ultra-wealthy, your estate won't owe any taxes.

What is the tax structure for 2023? ›

The 2023 tax year—the return you'll file in 2024—will have the same seven federal income tax brackets as the 2022-2023 season: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your filing status and taxable income, including wages, will determine the bracket you're in.

In California, there is no state-level estate or inheritance tax. If you are a California resident, you do not need to worry about paying an inheritance tax on the money you inherit from a deceased individual. As of 2023, only six states require an inheritance tax on people who inherit money.

There is no inheritance tax in New York.

In addition to the Federal estate tax exemption increase, the New York State estate tax exemption has been adjusted for inflation as well. The New York State estate tax exemption amount for 2023 is $6,580,000, an increase from last year in the amount of $470,000.

The IRS boosted tax brackets by about 7% for each type of tax filer for 2023, such as those filing separately or as married couples.

If you are at least 65 years old or blind, you can claim an additional 2023 standard deduction of $1,850 (also $1,850 if using the single or head of household filing status). If you're both 65 and blind, the additional deduction amount is doubled.

Those rates—ranging from 10% to 37%—will remain the same in 2023. What's changing is the amount of income that gets taxed at each rate. For example, in 2023, an unmarried filer with taxable income of $95,000 will have a top rate of 22%, down from 24% in 2022.

California Inheritance Tax and Gift Tax

In 2021, this amount was $15,000, and in 2022 this amount is $16,000. Estates valued at less than $12.06 million in 2022 for single individuals are exempt from an estate tax.

Effective January 1, 2005, the state death tax credit has been eliminated. The information below summarizes the filing requirements for Estate, Inheritance, and/or Gift Tax: For decedents that die on or after January 1, 2005, there is no longer a requirement to file a California Estate Tax Return.

Like we mentioned earlier, Florida has no state estate tax or inheritance tax! In fact, the Sunshine State is one of 33 states that does not have either one.

What is Connecticut estate tax for 2023? ›

There is an estate tax in Connecticut. As of 2023, there is a flat estate tax rate of 12%.

You will “fall off the cliff” when your estate's value exceeds 105% of the basic exclusion amount. The 2023 New York estate tax cliff is $6,909,000 (105% of $6,580,000).

Massachusetts uses a graduated tax rate, which ranges between 0.8% and a maximum of 16%. Your estate will only attract the 0% tax rate if it's valued at $40,000 and below. An estate valued at $1 million will pay about $36,500.