States Without an Estate Tax or an Inheritance Tax
2015 List of States Without an Estate Tax or an Inheritance Tax
NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
Currently, a majority of U.S. states do not collect a death tax at the state level. Here is a summary of the changes to state estate taxes and inheritance taxes that took effect during the past few years:
- Delaware enacted a state estate tax effective July 1, 2009, which was supposed to expire on July 1, 2013. Nonetheless, lawmakers acted in the spring of 2013 to eliminate the sunset of the tax.
- State estate taxes were abolished by legislative action on January 1, 2010, in both Kansas and Oklahoma.
- Hawaii enacted an estate tax effective May 1, 2010. Then in May 2012, Hawaii tweaked its laws to provide that the Hawaii estate tax exemption will be tied to the federal estate tax exemption for decedents dying after January 25, 2012. In addition, Hawaii is the only state that currently offers portability of its estate tax exemption between married couples.
- On January 1, 2010, state estate taxes were repealed in both Illinois and North Carolina due to a repeal of the federal estate tax. Nonetheless, estate taxes came back in both states effective January 1, 2011, but North Carolina turned around and repealed its estate tax retroactively to January 1, 2013.
- On January 1, 2010, Rhode Island's estate tax exemption increased to $850,000 and has been indexed for inflation annually. Then, in June 2014, Rhode Island acted to increased its estate tax exemption to $1.5 million for deaths occurring on or after January 1, 2015, and the exemption will continue to be adjusted annually for inflation in future years.
- Effective January 1, 2011, Vermont's estate tax exemption increased to $2.75 million.
- Under Ohio budget laws, the Ohio estate tax was repealed as of January 1, 2013.
- On January 1, 2012, Oregon's estate tax rates changed so that estates valued between $1 million and $2 million will pay slightly less in estate taxes and estates valued over $2 million will pay more in estate taxes. Aside from this, in November 2012 a ballot measure to completely repeal Oregon's estate tax was defeated by a majority vote.
- Ilinois' estate tax exemption increased to $3.5 million effective January 1, 2012, and to $4 million effective January 1, 2013.
- Maine's estate tax exemption increased to $2 million on January 1, 2013.
- Tennessee's estate tax exemption increased from $1 million in 2012 to $1.25 million in 2013, $2 million in 2014, and $5 million in 2015. The tax will then be repealed in 2016.
- In 2012 legislation was passed that would have phased out Indiana's inheritance tax by 2022. In addition, the inheritance tax exemption was increased from $100,000 to $250,000 for certain family members effective January 1, 2012. Nonetheless, in May 2013 Indiana's inheritance tax was repealed retroactively to January 1, 2013, thereby allowing Indiana to join the list of states below.
- In June 2013, Washington made several changes to its state estate tax laws. Beginning in 2014, the $2 million estate tax exemption will be indexed for inflation annually; an estate tax deduction of up to $2.5 million will be available for certain family-owned business interests the values of which do not exceed $6 million; and the estate tax rates on the top four estate tax brackets will be increased.
- In an unusual move, Minnesota enacted a state gift tax that went into effect on July 1, 2013. Aside from this, Minnesota tweaked its estate tax laws as they are applied to nonresidents who own real estate in Minnesota. The new legislation included Minnesota property held in a pass-through entity such as an S corporation, a partnership (including a multi-member LLC taxed as a partnership), a single-member LLC or similar entity, or a trust in a nonresident's estate. But in another unusual move, legislation was signed in March 2014 which repealed the state gift tax retroactively. In addition, the state estate tax exemption was retroactively increased to $1.2 million for all 2014 deaths and the estate tax rate was tweaked so that the first dollars are taxed at a 9% rate which maxes out at 16%. The estate tax exemption will then be increased in $200,000 increments so that it reaches $2 million in 2018. The new law also allows married couples to use ABC Trust planning in order to defer the payment of all estate taxes until after the death of the second spouse. Finally, the law taxing a nonresident decedent's interest in a pass-through entity was also modified to exclude certain publicly traded entities, but it still applies to entities taxed as partnerships or S corporations that own a closely held business, farm, or cabin.
- In April 2014, New York made significant changes to its estate tax laws by increasing the state estate exemption from $1 million to $2.0625 million for deaths occurring on or after April 1, 2014, and before April 15, 2015. The exemption will then continue to increase on an annual basis until it matches the federal estate tax exemption in 2019.
- On May 15, 2014, H.B. 739, Maryland Estate Tax - Unified Credit was signed into law. This new law repeals and then re-enacts Maryland's estate tax so that the estate tax exemption will increase beginning in 2015 until it equals the federal estate tax exemption in 2019. In addition, beginning in 2019 Maryland will recognize portability of its estate tax exemption between married couples. Refer to Maryland Estate Tax Changes Go Into Effect in 2015 for more information about these changes.
List of States That Will Not Collect State Death Taxes in 2015
Here is the list of the jurisdictions that will not impose a state estate tax or a state inheritance tax as of January 1, 2015:
- New Hampshire
- New Mexico
- North Carolina
- North Dakota
- South Carolina
- South Dakota
- West Virginia
For a list of the states that currently collect a state estate tax and their current exemption amounts, refer to the State Estate Tax and Exemption Chart.
For an overview of state inheritance tax laws, refer to the State Inheritance Tax Chart.