New York Estate Tax: Exemption, Rates, and the Cliff

The estate tax is one piece of New York estate planning, and it follows rules that are separate from the will, trust, and probate mechanics covered in the main guide. New York is one of a minority of states that still imposes its own estate tax, and its exemption is far below the federal one. The feature that catches families off guard is the cliff: an estate a few hundred thousand dollars over the exemption can owe several hundred thousand dollars in tax.

How New York taxes an estate

New York imposes the estate tax on the transfer of the New York estate of every person who was a New York resident at death, under N.Y. Tax Law § 952. The tax is paid by the estate before assets pass to heirs. It is not an inheritance tax, which some states levy on the people who receive property. The difference between the two, and the fact that New York has no inheritance tax, trips up many families.

The starting point is the New York gross estate. Under N.Y. Tax Law § 954, that figure equals the decedent’s federal gross estate, whether or not a federal estate tax return is required, reduced by the value of real or tangible personal property located outside New York, and increased by certain gifts. The federal gross estate captures nearly everything the decedent owned or controlled at death: real estate, bank and investment accounts, business interests, retirement accounts, and life insurance the decedent owned.

An estate of a nonresident is taxed only on real property and tangible personal property located in New York, as the Department of Taxation and Finance explains. Intangible assets such as bank accounts and securities are not taxed to a nonresident’s estate.

The 2026 exemption and who must file

The basic exclusion amount sets the threshold. For deaths on or after January 1, 2026, through December 31, 2026, the basic exclusion amount is $7,350,000. It was $7,160,000 for deaths in 2025 and $6,940,000 for deaths in 2024. The figure is recomputed each year for inflation under Tax Law § 952(c), which sets it at five million dollars adjusted by the change in the consumer price index since 2010.

A resident estate must file a New York estate tax return when the federal gross estate plus any includible gifts exceeds the basic exclusion amount. New York also adds back taxable gifts the decedent made during the three-year period ending on the date of death, under Tax Law § 954(a)(3). Gifts made while the decedent was a nonresident, gifts made before April 1, 2014, and out-of-state real or tangible property are excluded from the add-back. The three-year gift add-back does not apply to the estate of anyone dying on or after January 1, 2032.

The estate tax cliff

New York gives the exemption through a credit rather than a deduction, and the credit disappears quickly for estates that pass the line. Under Tax Law § 952(c), an estate at or below the basic exclusion amount receives a credit equal to the entire tax, so it owes nothing. Once the taxable estate rises above the exclusion, the credit begins to phase out. When the taxable estate exceeds 105% of the exclusion, the statute allows no credit at all, and the tax is computed on the full taxable estate from the first dollar.

For 2026, 105% of the $7,350,000 exclusion is $7,717,500. An estate above that amount gets no benefit from the exemption, and the tax that then applies is computed on the full schedule in Tax Law § 952(b). Inside the narrow band between the exclusion and 105% of it, the credit shrinks rapidly, which produces effective tax rates on that slice of the estate well above 100%.

New York estate tax rates

New York computes the tax on the whole taxable estate using the graduated schedule in Tax Law § 952(b), reproduced on the tax computation table in the Form ET-706 instructions. The lowest bracket is 3.06% on a taxable estate up to $500,000. The rate climbs through a series of brackets and reaches the top marginal rate of 16% on the portion of a taxable estate above $10,100,000. An estate over $10,100,000 pays $1,082,800 plus 16% of the excess over that amount.

Because the schedule applies to the entire taxable estate once the credit is gone, the practical rate on a mid-sized taxable estate lands in the high single digits to low double digits. The rate table is the same regardless of the date of death within a given version of the form, but the exclusion amount that determines the credit changes year to year.

Filing and paying the tax

The estate has nine months from the date of death to file the return and pay the tax, according to the Department of Taxation and Finance. The estate files Form ET-706, the New York State Estate Tax Return, using the version designated for the decedent’s date of death. New York also requires a completed federal Form 706 to accompany the New York return, even when the estate is not large enough to owe a federal return.

1. Build the New York gross estate

   Start with the federal gross estate, subtract real and tangible personal property located outside New York, and add back taxable gifts made within three years of death that are not already in the federal gross estate. The result is the New York gross estate under Tax Law § 954.

2. Compare the estate to the exclusion

   Measure the federal gross estate plus includible gifts against the basic exclusion amount for the year of death, $7,350,000 for deaths in 2026. A return is required when the total exceeds that amount.

3. Complete Form ET-706 and federal Form 706

   Use the tax computation table on the ET-706 for the applicable date of death, and attach a completed federal Form 706 even if no federal return is otherwise due.

4. File and pay within nine months

   Submit the return and pay the tax within nine months of the date of death. An estate that needs more time can request an extension.

An estate that cannot meet the deadline can apply for an extension using Form ET-133. An extension to file generally may not exceed six months, and interest runs on any tax paid after the nine-month due date. New York stopped requiring estate tax waivers to release a decedent’s assets for anyone who died on or after February 1, 2000.

New York estate tax vs. the federal estate tax

Many New York estates owe state tax while owing nothing to the federal government, because the two exemptions are far apart. As of 2026, the federal estate tax exempts up to $15,000,000 per person, more than double New York’s $7,350,000 exclusion. An estate between the two thresholds can face a New York bill with no matching federal one.

Two other differences matter. Federal law lets a surviving spouse use a deceased spouse’s unused exemption, a feature called portability; New York’s estate tax has no portability provision, so an unused New York exclusion is lost at the first spouse’s death. And the federal exemption phases out nothing at a cliff, the federal tax applies only to the amount above the exemption, while New York’s cliff can tax the whole estate.