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Tax Breaks


More States Giving Heirs a Break on Estate Taxes

If you're concerned that state taxes will erode your children's inheritance, you may have one less thing to worry about this year. In an effort to dissuade wealthy retirees from decamping, six states have increased the amount of assets that are exempt from estate taxes, reducing or eliminating the amount that heirs will have to pay. Tennessee repealed its death tax entirely.

See Also: SLIDE SHOW: 10 States With the Scariest Death Taxes

Federal estate taxes are no longer a problem, at least for all but the uber-wealthy. In 2016, up to $5.45 million is exempt from federal estate taxes -- double that for married couples. But 14 states and the District of Columbia impose their own estate tax, levied on the estate before it's distributed; four states have only an inheritance tax, paid by the beneficiaries. Maryland and New Jersey collect both taxes. In New Jersey, estates valued at more than $675,000 are subject to state estate taxes; Oregon and Massachusetts tax estates valued at more than $1 million.

Those states are becoming the exception, though. Maine lawmakers voted last year to follow the ex­ample of Delaware and Hawaii and peg the state's exemption to the federal level. The law took effect January 1. New York's estate-tax exemption will rise to $4,187,500 from $3,125,000 on April 1 and gradually increase until 2019, when it will match the federal threshold. Maryland, which increased its estate-tax exemption to $2 million from $1.5 million on January 1, will also match the federal threshold by 2019.

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In New Jersey, lawmakers are debating whether to pair an increase in the state's gas tax -- the second-lowest in the nation -- with some kind of estate-tax relief. It's not an easy call. The Garden State's death taxes are unpopular, but they're a big source of revenue, expected to raise an estimated $755 million in fiscal 2016.

See Also: RETIREE TAX MAP: States With Estate and/or Inheritance Taxes

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