Now that 2013 is underway, there are finally some solid numbers from which to base your tax planning – at least from a federal tax standpoint. But what about those state taxes? If you reside in one of 22 jurisdictions that assess an independent inheritance or estate tax, it’s time to start paying attention to your state’s tax changes.
Forbes recently provided some helpful information in an article bluntly titled “Where Not To Die in 2013.”
There always are myriad state level taxes to consider. However, here’s the rub: several states may tax one estate. For example, the family of the Seattle resident who spent summers in his Waikiki condo could have to face estate tax liability in both Washington and Hawaii, in addition to Federal level taxes. Twenty-two jurisdictions (including the District of Columbia) exact some form of taxation. The tax laws of many of those jurisdictions were not written with the current federal taxation limits in mind, because those have only been on the books since the beginning of the year.
The good news is that Hawaii tries to match the Federal Coupon amount (i.e., the amount that can be passed free of estate tax), and that amount is currently $5.25 million. This means that estates of no more than $5.25 million ($10.5 million for couples who plan carefully to use both of their Coupons) can pass estate tax-free. The bad news is that the Hawaii estate tax on the excess over $5.25 million is 16%--which is imposed on top of the 40% Federal estate tax. Federal law does allow a deduction for State estate taxes paid (within limits), and this brings the overall tax bite down to about 50%.
So what states are the worst for 2013? It’s worth clicking over to the original article and map on Forbes.Reference: Forbes (January 28, 2013) “Where Not To Die in 2013”