Federal estate taxes are no longer a problem for all but the extremely wealthy. In 2017, as much as $5.49 million in assets is exempt from federal estate taxes–double that for a married couple. In 2018, the exemption will rise to $5.6 million.
However, state estate taxes, which kick in for estates valued at $1.5 million or less in several states, could take a big bite out of your legacy. Your home and retirement accounts will be counted when your estate is valued for tax purposes, and proceeds from your life insurance could be counted, too, depending on how the policy is owned and who gets the money.
Fourteen states and the District of Columbia impose an estate tax, and six states impose an inheritance tax, which can force certain heirs to give up a portion of their inheritance. The good news is that a growing number of states are increasing their estate tax exemptions in an effort to dissuade well-off retirees from moving to more tax-friendly jurisdictions. New Jersey and Delaware are going even further, eliminating estate taxes altogether at the end of 2017.
And if the federal estate tax is repealed as part of tax reform, state estate taxes could fall by the wayside, too, tax experts say. Most states rely on the federal government to audit estate tax returns and enforce the tax. In the absence of a federal estate tax, some states may decide it’s not worth hiring administrators to enforce a tax that typically brings in less than 1% of their overall revenue.
But that’s still in flux. Where would the taxman take the most of your estate today? Take a look.
SEE ALSO: RETIREE TAX MAP: State-by-State Guide to Taxes on Retirees
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Date — October 30, 2017 4:00 am
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