New York state increases estate tax exemption

There is somewhat happy news for New Yorkers, who endure some of the highest tax rates in the United States. Funnily enough, as of April Fool’s Day and with the passing of the Executive Budget for 2014-2015, New York state doubled its estate tax exemption, which will rise gradually through 2019. So if you can just live that long, the New York state estate tax exemption will eventually be in conformity with the quite generous federal estate tax exemption, which is projected to be $5.9 million by then. In the meantime, the new exemption schedule is as follows:

For deaths as of April 1, 2014 and before April 1, 2015, the exemption is $2,062,500.

For deaths as of April 1, 2015 and before April 1, 2016, the exemption is $3,125,000.

For deaths as of April 1, 2016 and before April 1, 2017, the exemption is $4,187,500.

For deaths as of April 1, 2017 and before January 1, 2019, the exemption is $5,250,000.


While more people will be exempt from the state tax levy, there is an April Fool’s Day catch. Prior to April 1, 2014, all estate assets up to $1,000,000 were exempt. Under the new tax law with a current exemption level of $2,062,500, if your assets are just 5% more than $2,062,500, you will be taxed on the FULL amount, not just the amount over the exemption amount. Also. There is a new three-year look back period for taxable gifts made on or after April 1, 2014 and through December 31, 2018. There also does not seem to be a portability provision, which would allow spouses to shelter additional assets. The goal of this long overdue reform is to prevent the exodus of wealthy individuals from New York to more tax-favored states and shed New York’s unfavorable reputation for high taxes,  but the law as it stands will likely not have this effect.

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