📅 2026 Update: Changes in State Estate Taxes

Since the original article was published, there have been important updates to estate taxes and filing requirements. These changes affect the federal estate tax exemption, gift tax exclusions, and costs associated with closing letters. The earlier article continues further down the page for more foundational information.

💰 Estate Tax Exemption Increase

The federal estate tax exemption has risen from $13,990,000 in 2025 to $15,000,000 in 2026. This increase means that estates valued below this amount are not subject to federal estate taxes. It's a significant change for many families planning their estates.

🎁 Gift Tax Annual Exclusion Increase

The annual exclusion for gifts has increased from $18,000 in 2024 to $19,000 for 2025 and 2026. This means individuals can give up to $19,000 per recipient without incurring gift tax. This increase may help families transfer wealth more efficiently.

📄 Estate Tax Closing Letter Fee

Starting on October 26, 2026, the fee for obtaining an estate tax closing letter increased to $76. This letter is important as it confirms that the IRS has processed the estate tax return. The fee change could impact estate planning budgets.

⏰ Filing Deadlines and Extensions

The estate tax return (Form 706) is due nine months after the decedent’s date of death. If more time is needed, an extension can be requested using Form 4768. This extension request must be filed before the original due date.

📌 Key Points Summary

  • The federal estate tax exemption is now $15,000,000.
  • Gift tax exclusion has risen to $19,000 for 2026.
  • The fee for an estate tax closing letter is $76.
  • Estate tax returns are due nine months after death.
  • Extensions to file can be requested with Form 4768.

💡 Tips for Understanding Estate Taxes

It's important to review your personal situation with your attorney.

📝 Understand the Exemption Limits

Know the current federal estate tax exemption limits. In 2026, it is set at $15,000,000. This is crucial for planning how much of an estate may be taxed.

📅 Keep Track of Deadlines

Always be aware of filing deadlines. The estate tax return must typically be filed within nine months of the decedent's death. Missing this deadline can lead to penalties.

📄 Use the Right Forms

Make sure to use the correct forms for tax filings. Executors should use Form 706 to calculate estate taxes, while nonresident aliens need Form 706-NA.

⏳ Consider Filing Extensions

If you need more time to prepare the estate tax return, consider filing for an extension. Use Form 4768 to request additional time, but remember it must be submitted before the original deadline.

💸 Plan for Closing Letter Fees

Be prepared for the $76 fee for an estate tax closing letter after October 26, 2026. This fee is necessary for confirming that all estate taxes have been settled.

🏆 Services for Estate Taxes Ranked by User Reviews (2026)

This section reviews services that assist with estate taxes and related planning. These services are based on Trustpilot data as of October 2026. Ratings can vary over time, and customer reviews are just one indicator of a service's reliability.

🥇 1. MyExpatTaxes

MyExpatTaxes has been rated 4.7 out of 5. It is known for providing tax software specifically for U.S. expats and assisting with international tax filing needs. Some users have reported that the interface can be complex, which may require additional time to navigate.

🥈 2. Trust & Will

Trust & Will holds a rating of 4.5 out of 5. This service specializes in estate planning, offering digital wills and trusts. However, some users have noted issues with customer support responsiveness, which could affect timely assistance.

🆓 Free Government Resources

The IRS offers comprehensive resources related to estate and gift taxes. This includes FAQs and detailed instructions on the necessary forms, such as Forms 706 and 2848. Utilizing these resources can help navigate estate tax requirements without incurring additional costs.

🔎 What to Compare When Choosing Estate Services

  • 🏷️ Trustpilot Ratings: Look at user scores to gauge overall satisfaction.
  • 🗂️ Specialization: Check if the service specializes in estate planning or tax filing.
  • 📞 Customer Support: Evaluate the responsiveness of customer service.
  • 💻 User Experience: Consider the ease of use of the software or platform.
  • 💰 Fees and Costs: Compare the costs associated with using each service.

❓ Frequently Asked Questions

❓ What is the estate tax exemption for 2026?

The estate tax exemption for decedents dying in 2026 is $15,000,000. Estates valued under this amount are not subject to federal estate tax.

📅 When is the estate tax return due?

The estate tax return, filed using Form 706, is generally due nine months after the date of death of the decedent.

⏳ Can I get more time to file the estate tax return?

Yes, you can request an extension to file your estate tax return using Form 4768. This must be submitted before the original deadline.

🔍 What is the fee for an estate tax closing letter?

As of October 26, 2026, the fee for an estate tax closing letter is $76. This letter confirms that the IRS has processed the estate tax return.

🎁 What is the gift tax annual exclusion for 2026?

The annual exclusion for gifts in 2026 is $19,000. This allows individuals to give this amount to each recipient without incurring gift tax.

🏠 Are there state estate taxes I should know about?

Yes, as of October 12, 2026, 12 states and the District of Columbia impose estate taxes, and five states levy inheritance taxes. It's important to be aware of state-specific rules.

⚖️ Recent Cases Related to Estate Taxes

Recent court rulings have clarified various aspects of estate and gift taxes, impacting how estates are managed and taxed. These rulings can influence estate planning strategies and compliance.

For more recent rulings, browse more rulings on the news page.

End of October 2026 Update





Introduction to State Estate Taxes


Estate planning is an essential aspect of financial planning, and it involves determining how your assets will be distributed after you pass on. However, one factor that many people do not account for is how much of their estate will be taken in taxes. While the federal government levies estate taxes, individual states also have their own estate taxes, known as state estate taxes.

First, we will explore what state estate taxes are and how they differ from federal estate taxes. Next, we will examine the different state estate tax approaches and the trends in state estate tax laws. Then, we'll explore some estate tax planning strategies that can protect your assets and minimize your tax liability. Finally, we will discuss some recent changes in state estate tax laws and what they mean for your estate planning.

What are State Estate Taxes?


State estate taxes are levied on the transfer of a person's assets upon their death. These taxes are imposed on the value of the estate, which includes assets such as real estate, investments, cash, and personal property. Unlike federal estate taxes, which only affect wealthy individuals, state estate taxes may affect a broader range of estates.

Currently, thirteen states and the District of Columbia have a state estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, and Washington D.C. The state estate tax rates range from 0.8% to 20% and often have a lower exemption limit than the federal estate tax ($11.7 million for individuals in 2021).

How do State Estate Taxes Differ from Federal Estate Taxes?


The federal estate tax is a tax on a person's estate at the time of their death, and it applies only to estates with a value above the federal exemption limit. For 2021, this limit is $11.7 million for individuals ($23.4 million for married couples). The federal estate tax rate is 40%.

State estate taxes, on the other hand, often have a lower exemption limit than the federal estate tax. This means that estates with a lower value may still be subject to state estate taxes. Additionally, state estate tax rates are generally lower than the federal estate tax rate, but some states have a higher rate than the federal rate.

State Estate Tax Law Changes


In recent years, there have been several changes to state estate tax laws. Some states have increased their exemption limits, while others have eliminated their estate tax altogether. For example, in 2018, New Jersey changed its estate tax law to increase the exemption limit to $2 million, while in 2021, Connecticut increased the exemption limit to $7.1 million.

Other states have repealed their estate tax entirely. Maryland, New York, Oregon, and Connecticut have all repealed their estate tax, and the District of Columbia has repealed its estate tax as of 2022. These changes reflect a trend towards simplifying state estate tax laws and reducing the impact on the average taxpayer.

Different Approaches to State Estate Taxes


Each state that has an estate tax employs a different approach to calculating the tax. Some states use a "cliff" approach, while others use a "graduated" approach. The "cliff" approach imposes the state estate tax on the entire estate if it exceeds the exemption limit, while the "graduated" approach imposes the tax only on the portion of the estate that exceeds the exemption limit.

For example, Washington State has a "cliff" approach, meaning that if an estate is valued at $2,193,000 or more, it will be subject to the state estate tax. In contrast, Vermont has a "graduated" approach, meaning that only the portion of the estate above the exemption limit is subject to the state estate tax. In Vermont, this exemption limit is $5 million for 2021.

Estate Tax Planning Strategies


There are several estate tax planning strategies that can help minimize your estate tax liability. One strategy is gifting, where you transfer assets to family members or other beneficiaries during your lifetime. Currently, you can gift up to $15,000 per year to an individual without triggering a federal gift tax. Over time, gifting can reduce the value of your estate, and therefore your estate tax liability.

Another strategy is to set up a trust. A trust is a legal arrangement where you transfer ownership of your assets to a trustee, who manages the assets on behalf of your beneficiaries. A trust can provide benefits such as income tax savings and protection of assets from creditors. It can also help reduce your estate tax liability by removing the assets from your estate.

Life insurance can also be an effective tool for estate tax planning. The proceeds from a life insurance policy are generally paid to the beneficiary tax-free, so they can be used to pay estate taxes or provide financial security for your beneficiaries.

Conclusion


In summary, state estate taxes are an important consideration for any estate planning strategy. Thirteen states and the District of Columbia currently have a state estate tax, with rates ranging from 0.8% to 20%. While state estate taxes may not affect as many estates as the federal estate tax, they can still have a significant impact on your estate's value.

Over time, state estate tax laws have changed, with some states increasing their exemption limits, and others repealing their estate tax altogether. Each state employs a different approach to calculating the tax, with "cliff" and "graduated" approaches being the most common.

To minimize your estate tax liability, it is important to consult with a qualified estate planning professional and consider strategies such as gifting, trusts, and life insurance. Keep in mind that estate tax laws are subject to change, so it is essential to stay informed and keep your estate planning strategies up to date.

Inheritance tax laws, like other tax laws, can be determined by the government within each jurisdiction. Although Federal inheritance tax laws apply to all inheritance across the country, each state may also impose a separate inheritance tax law. Although the Federal inheritance tax law is set to expire in 2010, there are still several states that impose a separate inheritance tax law.

It appears that the lack of a Federal inheritance tax law, sets the percentage of Federal tax on inheritance at zero. It is likely that the Federal government will act quickly and enact new inheritance tax rates and laws in the immediate future. In fact, it is likely that the law will apply even to those that may have been exempt from paying the tax, because the inheritance tax law will be retroactive. Each beneficiary must also pay a state inheritance tax if the inheritance tax laws in their state mandate it.

A little over one fifth of the states have an inheritance tax law. Many states had let their inheritance tax laws expire but some of those states have reenacted their laws. For example, Delaware allowed the inheritance tax to lapse, but the state's government enacted an inheritance law that will be in effect until 2013.

At that time, the state may again allow the inheritance tax law to expire, or they may choose to continue to impose the inheritance tax. In contrast, some states have lowered the burden to beneficiaries by raising the exemption limit. Several states have allowed beneficiaries to inherit more money without facing a tax based on inheritance tax laws. In addition, some states have allowed their inheritance tax law to expire and have failed to reenact those laws.

Beneficiaries in each state will likely be subject to differing state inheritance tax laws. Those laws may have differing maximum exemptions and may impose an inheritance tax at varying rates.  In 2010, around nine state had a maximum exemption of $1,000,000. There are even a few states that allow beneficiaries to inherit up to $3,500,00 tax free.

Conversely, states like New Jersey only allow an inheritance tax exemption up to $675,00 dollars. Some states impose both an estate tax before the inheritance reaches the beneficiaries and an inheritance tax once the property is in ownership of the beneficiary. In Kentucky, both taxes are imposed by there are exemptions for immediate family members that inherit property.

Like other tax laws, inheritance tax laws may vary between the Federal government and each state's government. In theory, an individual could be exempt from one inheritance tax but be subject to the other. In some cases, beneficiaries must pay both a state and Federal tax on inheritance.