How Much Can You Inherit Tax-Free in NY?
Uncover the specifics of New York estate taxation. Learn how much wealth can be transferred without tax and the steps for compliance.
An estate tax is a levy imposed on a deceased person’s property before it is distributed to their heirs. This differs from an inheritance tax, which taxes the beneficiaries on the assets they receive; New York State does not impose an inheritance tax. Estates in New York may be subject to both federal and New York State estate taxes. Both tax systems feature an “exemption” or “exclusion” amount, representing the value of an estate that can pass without incurring tax.
Federal Estate Tax Exemption
The federal estate tax exemption amount is a significant threshold, set at $13.99 million per individual for those passing away in 2025. This high exemption means that only a small percentage of estates across the United States are typically subject to federal estate tax. For married couples, this exemption can be combined, potentially allowing up to $27.98 million to pass free of federal estate tax.
The federal exemption operates independently of New York’s state-level estate tax. While the federal threshold is substantially higher, New York has its own distinct rules and a much lower exemption amount. This means an estate might not owe federal estate tax but could still be subject to New York State estate tax.
New York Estate Tax Exemption
New York State has its own estate tax system, governed by Tax Law Article 26. For 2025, the New York State estate tax exemption amount is $7.16 million per person. This amount is adjusted annually for inflation.
A characteristic of the New York estate tax is its “cliff” effect. If the value of a taxable estate exceeds the exemption amount by more than 5%, the entire estate becomes subject to tax from the first dollar, rather than just the amount exceeding the exemption. For 2025, this “cliff” is approximately $7,518,000, meaning estates at or above this value lose their entire $7.16 million exemption. This can result in a significant and disproportionately large tax liability for estates just over the threshold.
Unlike the federal estate tax, New York does not allow for “portability” of the unused exemption between spouses. Each spouse has their own $7.16 million exemption, and if one spouse does not utilize their full exemption, it cannot be transferred to the surviving spouse. This difference often necessitates distinct estate planning strategies for married couples in New York to fully utilize both exemptions.
Calculating the New York Taxable Estate
Determining the New York taxable estate involves identifying assets and applying deductions. The first step is to ascertain the gross estate, which includes all property interests the decedent owned at the time of death. This encompasses real estate, tangible personal property, bank and investment accounts, retirement accounts, and business interests. Life insurance proceeds are also included if the decedent owned the policy.
Certain gifts made by the decedent within three years of their death may also be added back into the gross estate. However, specific exceptions apply, such as gifts made when the decedent was not a New York resident, or gifts of real or tangible personal property located outside New York State.
Common deductions include funeral expenses and administration expenses. Debts owed by the decedent and mortgages or liens on their property are also deductible. Additionally, assets transferred to a surviving spouse qualify for a marital deduction, and transfers to qualified charities may be eligible for a charitable deduction. However, deductions related to real or tangible personal property located outside New York State are typically not permitted for New York resident estates.
New York Estate Tax Reporting Requirements
After calculating the New York taxable estate, reporting obligations must be met. The New York State Estate Tax Return, Form ET-706, must be filed for estates of New York residents if the gross estate value exceeds the state’s exemption amount. Filing is also required if the estate is obligated to file a federal estate tax return. A copy of the federal estate tax return, Form 706, must be submitted with the New York return.
The deadline for filing Form ET-706 is nine months after the decedent’s date of death. If additional time is needed to prepare the return, an extension of up to six months can be requested by filing Form ET-133. An extension to file does not extend the deadline for paying any estate tax owed; payment remains due by the original nine-month date. In cases of undue hardship, an application for an extension of time to pay the tax, Form ET-415, can be submitted, potentially extending the payment period for up to four years.