What Is the Estate Tax in New York?
Understand New York estate tax rules, including calculation, exemptions, and its interaction with federal law. Navigate NY's unique estate tax system.
The New York estate tax is a levy imposed by the state on the transfer of a deceased person’s property. This tax applies to assets owned by individuals who were residents of New York at the time of their death, as well as certain property located within the state owned by non-residents. Its purpose is to generate revenue for the state, collected from the value of wealth transferred from the deceased to their beneficiaries. The tax is calculated based on the net value of a deceased person’s estate, after accounting for specific deductions.
Understanding the New York Estate Tax
The New York estate tax is a state-imposed “death tax” that applies to the value of a deceased person’s assets. This tax is distinct from an inheritance tax, which would be paid by the beneficiaries receiving the assets. Instead, the estate itself is responsible for paying the New York estate tax before assets are distributed to heirs.
For non-residents, the tax applies specifically to real property or tangible personal property located within New York State at the time of their death. Even if a non-resident’s total estate exceeds the exemption, only their New York-situs real and tangible property would be subject to the tax. The concept of the “taxable estate” forms the basis for calculating this tax, representing the estate’s value after certain allowable reductions.
Determining the New York Taxable Estate
Calculating the New York taxable estate begins with identifying the “gross estate,” which includes nearly all property the deceased owned at the time of death. This encompasses real estate, bank accounts, investment portfolios, and business interests. Life insurance proceeds can also be included if the deceased owned the policy, even if payable to a named beneficiary. Fair market value on the date of death is used for valuation.
From the gross estate, several deductions are permitted to arrive at the taxable estate. These deductions include funeral expenses, administration expenses (such as attorney’s fees, executor’s commissions, and appraisal costs), and debts owed by the decedent. An unlimited marital deduction is available for assets passing to a surviving spouse, which can defer the estate tax until the surviving spouse’s death. Bequests made to qualifying charitable organizations can also be deducted, reducing the taxable estate.
The New York estate tax includes a “cliff” or “clawback” provision. This provision can lead to a disproportionately higher tax liability for estates that are only slightly over the threshold.
New York Estate Tax Rates and Exemption
The New York estate tax exemption amount is adjusted annually for inflation. For deaths occurring in 2025, this exemption is set at $7.16 million. Estates with a taxable value at or below this amount do not owe New York estate tax.
If an estate’s value exceeds the exemption, a progressive tax rate structure applies. New York’s estate tax rates range from 3.06% to 16%. The top rate of 16% applies to estates valued over $10.1 million.
The calculation of the tax is directly impacted by the “cliff” provision. If a taxable estate is between the exemption amount ($7.16 million for 2025) and 105% of the exemption (approximately $7.518 million for 2025), the tax is applied only to the portion exceeding the exemption. However, if the taxable estate’s value exceeds 105% of the exemption, the entire estate is taxed from dollar one, meaning the benefit of the exclusion is entirely removed. This feature highlights the importance of estate planning for estates near or above the exclusion threshold.
Interaction with Federal Estate Tax
The New York estate tax operates independently from the federal estate tax. This means an estate might not owe federal estate tax but could still be subject to New York estate tax. The main difference between the two is their exemption amounts. For 2025, the federal estate tax exemption is $13.99 million per individual. This contrasts with New York’s $7.16 million exemption for the same year.
State estate taxes paid can reduce the federal estate tax liability. State estate taxes are deductible from the gross estate when determining the federal taxable estate. This deduction can lower the overall federal estate tax burden for estates large enough to be subject to both.
There is no federal “state death tax credit” that directly offsets state estate taxes. The deductibility of state taxes is the main mechanism for reducing federal estate tax related to state-level levies. The concept of “portability” for married couples is another distinction. While federal law allows a surviving spouse to use any unused portion of a deceased spouse’s federal exemption, New York State does not offer this portability. Each spouse in New York has their own separate exemption, and if it is not utilized upon the first spouse’s death, it is lost for New York estate tax purposes.
Filing the New York Estate Tax Return
The responsibility for filing the New York estate tax return, Form ET-706, falls to the executor or administrator of the deceased person’s estate. This form is required if the total value of the federal gross estate, plus any includible gifts, exceeds the New York basic exclusion amount applicable at the date of death. Even if a federal estate tax return (Form 706) is not required, it must still be completed and attached to the New York return.
The New York estate tax return, Form ET-706, is due within nine months after the decedent’s date of death. An extension of time to file the return can be requested for up to six additional months by filing Form ET-133. An extension to file does not extend the time to pay the tax due; payment is still required by the original nine-month deadline.
Completed Form ET-706, along with any supporting documentation, should be mailed to the New York State Estate Tax Processing Center. Failure to file the return or pay the tax by the due date can result in interest and penalties. Late payment incurs interest from the original due date, and a late filing penalty can be assessed, potentially up to 10% of the total tax due if the return is more than 60 days late.