Home › Business › Estate Taxes › Ny Estate Tax
The New York Estate Tax
The New York Estate Tax
New York is pretty decent when it comes to taxes for retirees. For starters, your Social Security benefits aren’t taxed. However, New York has state income tax rates that range from 4.00% to 10.90%. If you have money from pensions or retirement accounts, you can deduct a portion of it, which can help lower your taxable income.
If you’re living in New York City, remember that the city has its own income taxes on top of the state taxes, so be aware of that if you’re in one of the five boroughs. When it comes to property taxes, the overall rate in New York is about 1.73%. Sales tax is set at 4% by the state, but it can go up to 9% in some areas once you add in local county and city taxes.
Whether you're planning your own legacy in your later years or handling a relative’s estate, this is your guide to New York estate tax laws.
Table of contents
Key Takeaways:
- New York estate tax applies to estates over $6.94 million, with a cliff that taxes the whole estate if it’s above $7,287,000.
- New York doesn’t allow spouses to share unused estate tax exemptions between them.
- New York estate tax rates start at 3.06% and can go up to 16%, depending on how much your estate exceeds the exemption threshold.
The importance of estate tax planning
Estate tax planning in New York is more than just a good idea—it’s a must if you want to protect your loved ones from unexpected costs. The NY estate tax can come into play for estates over $6.94 million, and if you’re not prepared, your heirs could face a hefty tax bill.
That’s why getting ahead of it matters. There are some smart ways to reduce or even avoid the NY estate tax, like gifting assets during your lifetime, setting up trusts, or donating to charity. By planning now, you’re not only saving your heirs from a financial headache, but also making sure your estate is distributed according to your wishes.
Is there a New York state estate tax?
New York does have an estate tax, and it’s something anyone with significant assets should be aware of. The NY state estate tax applies to estates that are worth more than a certain amount when a person passes away. As of 2024, that threshold is $6.94 million. If the estate is valued under that, there’s no tax. But once the estate exceeds that number, New York begins to impose a tax on the estate.
What makes the estate tax in NY different is something called the “estate tax cliff.” If the value of an estate goes over the threshold by even a small amount, the entire estate can be taxed—not just the portion above the limit. This can create a much bigger tax bill than many people anticipate. The tax rates in New York are also progressive, meaning the more the estate is worth, the higher the tax rate that applies.
The estate tax exemption
The NY estate tax exemption for 2024 is $6.94 million. If an estate is worth less than this amount, no estate tax is owed. However, New York has a tricky “cliff” for very wealthy estates. If an estate’s value is just a bit above the $6.94 million threshold, taxes are only applied to the amount over the limit. If the estate value is more than 105% of the threshold, then the entire estate is taxed.
Say your estate is worth $7.1 million, it’s above the threshold but not too far over. Because $7.1 million is less than 105% of $6.94 million (which is $7,287,000), you only pay estate tax on the amount that exceeds $6.94 million.
So, if your estate is valued at $7.1 million, the taxable amount is $160,000 (which is $7.1 million minus $6.94 million). You’d pay tax on that $160,000 portion.
However, if your estate were worth $7.5 million, that’s over $7,287,000, which means the entire estate is taxable. So in this case, you’d end up paying estate tax on the full $7.5 million, not just the amount over the threshold. This cliff can significantly increase the tax burden if your estate value exceeds the 105% mark.
Unlike the federal estate tax, New York doesn’t allow spouses to share their estate tax exemption. Each spouse's estate has to meet the exemption limit on its own, and any unused exemption can’t be transferred to the surviving spouse. Because of this, it’s really important to plan carefully—using tools like trusts can help make the most of each spouse’s exemption and reduce your estate tax liability.
If an estate is worth more than the exemption limit, you must file Form ET-706 with the New York State Department of Taxation and Finance within nine months of the person’s death. You can ask for more time to file, but any unpaid taxes will start accruing interest from the original due date.
New York estate tax rates
The estate tax rate in NY isn’t flat; it’s graduated, starting at 3.06% and going up to 16%. To figure out how much you’ll pay, you first need to determine your taxable estate, which is the value of your estate above the $6.94 million exemption. If your estate hits the cliff—meaning it’s worth more than $7,287,000—then the entire estate gets taxed.
Here’s a simpler way to figure out what you owe: Start by calculating how much of your estate is taxable. If your estate is worth less than $7,287,000, just subtract $6.94 million from your total estate value to get your taxable amount.
Next, check where your taxable estate falls on the tax bracket chart. The base tax amount tells you what you owe up to the lower end of your bracket. Then, take the amount by which your estate exceeds the lower limit of your bracket, multiply it by the marginal rate, and add that to the base tax amount.
Imagine your estate is worth $7.5 million in 2024. This amount is above the $6.94 million exemption but doesn’t exceed the $7,287,000 cliff, so you’ll only pay taxes on the amount above the $6.94 million threshold.
First, figure out your taxable estate. Subtract the $6.94 million exemption from your $7.5 million estate value, which gives you a taxable amount of $560,000. Suppose the base tax for this range is $200,000, and the marginal rate is 10% for the amount over the threshold.
So, you’d calculate the tax on the $560,000. First, find the tax for the portion over the threshold. Multiply $560,000 by 10%, which equals $56,000. Add this $56,000 to the base tax of $200,000, and you get a total estate tax of $256,000. So, on a $7.5 million estate, you’d owe $256,000 in New York estate tax.
Are New York real estate taxes a thing?
New York real estate taxes are very real and can be quite significant. When it comes to New York State real estate taxes, the amount you pay depends on your property’s assessed value, which is set by local officials. These taxes are used to support local services like schools and public safety. If you live upstate or in smaller cities across New York State, you’ll see taxes that are usually straightforward, based on the assessed value of your property and the local tax rate.
However, if you’re in the city, New York City real estate taxes come with their own set of rules. NYC divides properties into four classes—residential, commercial, industrial and utility—and each class has its own tax rate and assessment method. For example, residential properties in NYC are taxed based on their market value, but the city applies a special formula to determine the assessed value, which is often much lower than the market value.
Also, NYC has something called the "tax class system" that makes calculating your taxes a bit more complex. For instance, if you own a condo or co-op in Manhattan, the taxes you pay might be higher than those for a similar property in a less expensive part of the city. And let’s not forget about the potential for additional local levies or special assessments that could affect your total tax bill.
If this is all a bit confusing to you, you can hire an estate tax professional who can help you figure it out.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors.
But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. to find every possible tax deduction.
Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes.
Download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and more money on your taxes than last year, guaranteed.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
On average users save $3,700
Was this tip useful?
Yes
No