GUIDE TO FEDERAL & NEW YORK STATE
TAXATION OF ESTATES
What kind of taxes are estates subject to?
An estate may be subject to two types of tax and it is important to keep both
types in mind. The first type of tax is income tax. All estates are subject to
federal and state income taxes on income earned each year after the date of
death. If the estate earns income in a given year, the executor must file fiduciary
income tax returns (IRS Form 1041 and NYS Form IT-205) and pay any tax that
may be owed. Fiduciary income tax returns must be filed each year the estate
remains open and earns income.
The second type of tax is called estate tax and, unlike the income tax, it is a one
time tax. Generally, the estate tax is based upon the date of death value of the
estate's assets. This means that the tax is calculated as a percentage of the value
of the assets reduced by allowable deductions, exemptions and credits. Keep in
mind that the estate's assets will likely include non-probate as well as probate
property.
Not all estates are subject to estate tax. The following information is provided to
aid you in determining whether an estate is subject to the tax.
Do I need to file a federal estate tax return?
A federal estate tax return (form 706) must be filed by the executor for the estate
of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts is
more than the filing threshold for the year of the decedent’s death. The filing
threshold for 2020 is $11,580,000, for 2019 is $11,400,000, for 2018 is
$11,180,000, 2017 is $5,490,000 and for 2016 is $5,450,000.
Should I file a federal return even if the estate is below
the filing threshold?
You may want to file a federal estate tax return even when the gross estate is
below the filing threshold amount. For example, you must file a timely federal
estate tax return to preserve the portability of the estate tax exclusion between
spouses. Estate tax portability permits the executor of an estate to elect the
option, on behalf of the deceased's surviving spouse, to allow that spouse to use
any available estate tax exemption amount that remains unused at the time of
the taxpayer's death.
Do I need to file a New York State estate tax return?
New York State Resident Decedent
The Executor must file a New York State estate tax return if the amount of the
resident decedent’s federal gross estate, plus the amount of any includible gifts,
is greater than the basic exclusion amount applicable at the date of death.
The basic exclusion amount for dates of death on or after April 1, 2016, and
before April 1, 2017 is $4,187,500; on or after April 1, 2017, and before January 1,
2019 $5,250,000; on or after January 1, 2019 and before January 1, 2020
$5,740,000; and on or after January 1, 2020 and before January 1, 2021
$5,850,000.
New York Non-Resident Decedent
The Executor must file a New York State estate tax return if the estate includes
any real or tangible property located in New York State, and the amount of the
non-resident decedent’s federal gross estate, plus the amount of any includible
gifts, is greater than the basic exclusion amount applicable at the date of death.
When is The Estate Tax Return Due?
If you are the Executor or Administrator of an estate that is subject to federal
and/or New York State estate taxes, you must file a return and pay the tax within
nine months of the date of death unless you have filed an extension.