States With No Estate Tax 2021

An estate tax is a tax on your estates, or everything comprising your net worth, after you pass. Estate tax accounts for everything you own or have certain interests in at the date of your death by using the fair market value of each item, rather than what the deceased paid for the assets. Your property may include cash, real estate, insurance, trusts, business assets, annuities, financial securities, and other assets.

The value must exceed an exclusion limit set by law and only the amount that exceeds that threshold is subject to estate tax. The estate tax does not apply to assets that will be transferred to a surviving spouse, but when that spouse who inherited the estate dies, the beneficiaries may be subject to the tax.

It is important to note that an estate tax is applied to an estate before the assets are given to beneficiaries. An inheritance tax applies to assets after they have been inherited and are paid by the inheritor. There is no federal inheritance tax. As of 2019, Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania have their own inheritance tax. Inheritance tax is only applied if the amount is above each state’s threshold and is assessed on the amount that exceeds that threshold. Inheritance tax rates typically begin in the single digits and rise to a max of anywhere between 15% and 19%.

There are both federal estate taxes and state estate taxes. The Internal Revenue Service (IRS) requires estates to exceed $11.4 million to file a federal estate tax return and pay estate tax. Because the tax being assessed is only on the portion of the estate that exceeds the exclusion limit, the effective U.S. estate tax rate is substantially lower than the top federal rate of 40% in many instances.

An estate that is not subject to the federal estate tax may still be subject to state estate taxes. This is because state exemptions are significantly lower than the federal exclusion. All exemptions are less than half of the federal. However, estates valued at less than $1,000,000 are not taxed in any jurisdiction.

Estate tax rates are typically assessed in brackets after the exemption threshold, like income tax is assessed. The tax rate, as of 2019, typically starts at 10% and then increases in steps up to about 16%. Tax rates can be above and below these numbers. The estate tax rates in Connecticut are the lowest, starting at 7.80% and rises to 12%. The rates are the highest in Washington, where they go as high as 19%.

Below are the 13 states that levy state estate tax and their threshold minimums:

That being said, the states with no state estate tax as of January 1, 2020, are:

States With No Estate Tax 2021

State Estate Tax? Estate Tax Threshold 2021 Pop.
Alabama4,934,193
Alaska724,357
Arizona7,520,103
Arkansas3,033,946
California39,613,493
Colorado5,893,634
Connecticut36000003,552,821
Delaware990,334
Florida21,944,577
Georgia10,830,007
Hawaii55000001,406,430
Idaho1,860,123
Illinois400000012,569,321
Indiana6,805,663
Iowa3,167,974
Kansas2,917,224
Kentucky4,480,713
Louisiana4,627,002
Maine56000001,354,522
Maryland50000006,065,436
Massachusetts10000006,912,239
Michigan9,992,427
Minnesota27000005,706,398
Mississippi2,966,407
Missouri6,169,038
Montana1,085,004
Nebraska1,951,996
Nevada3,185,786
New Hampshire1,372,203
New Jersey8,874,520
New Mexico2,105,005
New York500000019,299,981
North Carolina10,701,022
North Dakota770,026
Ohio11,714,618
Oklahoma3,990,443
Oregon10000004,289,439
Pennsylvania12,804,123
Rhode Island15617191,061,509
South Carolina5,277,830
South Dakota896,581
Tennessee6,944,260
Texas29,730,311
Utah3,310,774
Vermont2750000623,251
Virginia8,603,985
Washington21930007,796,941
West Virginia1,767,859
Wisconsin5,852,490
Wyoming581,075

States With No Estate Tax 2021