The new laws for the estate tax in New York are going to benefit a lot of state citizens in the upper middle class, many of whom have worked over the course of a lifetime to accumulate their wealth.
Not everyone will benefit from the laws, however, as the financial “cliff” included in the language of the new law may raise the marginal tax rate for some individuals, according to Newsday. On April 1, the state’s estate tax exemption rose to over $2 million, more than doubling the previous exemption of $1 million. Further, the exclusion will continue to rise by $1,062,500 every April 1 until 2017.
Photo courtesy of Florian Giorgio (Unsplash.com)
By 2017, the New York state estate tax exemption will match the federal estate tax exclusion, which currently sits at $5.34 million, the news source explained. At this point, the state’s exemption will be indexed for inflation like the federal exemption.
This new law means that the majority of New York residents will be able to pass on their estates tax-free. Descendants of those that are above the exemption, however, may now face a larger tax bill than they otherwise would have, The Times Beacon Record explained. If the estate is valued between 100 percent and 105 percent of the exclusion amount, the additional sum will be taxed.
This means that an estate of $2,165,625 would only be taxed on the amount in excess of the $2,062,500 exemption this year – $103,125. However, an estate valued at only $1 more would be subject to tax on the entire sum of the estate. Further, the new estate tax law adds a limited three-year look back period for gifts made between April 1, 2014 and Jan. 1, 2019, during which time the value of any taxable gift is added back into the estate.
One of the reasons for the new estate tax law in New York was to make the state more attractive to wealthy seniors, according to Newsday. The wealthiest among them, however, may find better states in which to pass on their estates.
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