In the United States, if a taxpayer inherits property exceeding the lifetime exemption amount of $11.00 million set by the federal government, the taxpayer will be required to pay three types of taxes to the federal government: estate tax, gift tax, or inheritance tax. Different states in the U.S. have varying approaches to estate tax; some states impose estate or inheritance taxes based on their own regulations.
Some individuals work hard in China for decades, accumulating significant wealth, and obtaining a U.S. green card is a joyous occasion. However, if they pass away, their accumulated wealth faces the risk of being subjected to high estate taxes by "Uncle Sam." Therefore, depending on the tax laws of different states, placing one's assets in suitable locations can save a substantial amount of unnecessary taxes.
Estate Tax: The tax paid by heirs on the total value of the estate exceeding the exemption amount, calculated at the applicable tax rate.
Inheritance Tax: The tax paid based on the relationship between the heir and the deceased. Generally, spouses do not need to pay inheritance tax, and the inheritance tax for first-degree relatives is relatively low.
Currently, 15 states and the District of Columbia in the United States impose estate taxes, and 6 states impose inheritance taxes, with New Jersey and Maryland requiring both types of taxes.
What are the estate tax rates, inheritance tax rates, and exemption amounts in each state of the United States?
Highest Estate Tax:
Washington State has the highest estate tax rate at 20%, while the remaining 11 states have a maximum estate tax rate of 16%.
Highest Exemption Amount:
Hawaii and Delaware have the highest exemption amounts, equivalent to the federal estate tax exemption amount.
Lowest Exemption Amount:
Oregon has the lowest estate tax exemption amount, at only $1,000,000.
Inheritance Tax:
Among the 6 states that impose inheritance tax, Nebraska has the highest rate at 18%, followed by Kentucky and New Jersey at 16%.
Recent Changes: New Jersey eliminated the estate tax starting in 2018. New York's exemption amount was $5.25 million in 2018 and will match the federal exemption amount in 2019.