Does New York Have an Inheritance Tax?

The Short Answer: New York Has No Inheritance Tax

New York does not have an inheritance tax. If you have received money or property from someone who died, you do not file a New York inheritance tax return and you do not owe the State a transfer tax simply for receiving the inheritance. Only a handful of states — Pennsylvania, New Jersey, Kentucky, Maryland and Nebraska — impose a true inheritance tax, and New York is not one of them.

What New York does have is an estate tax. The two are confused constantly, even in published guidance, and the difference matters, because one of them can cost a New York family hundreds of thousands of dollars. It is worth being precise about which tax applies and to whom.

Inheritance Tax vs. Estate Tax

The two taxes are legally distinct and are paid by different people.

So when people ask whether New York has an inheritance tax, the accurate answer is: no inheritance tax, but yes to an estate tax that may apply to larger estates.

Do Beneficiaries Pay Tax on an Inheritance in New York?

Generally, no. Receiving an inheritance is not, by itself, a taxable event for the beneficiary in New York. Inherited cash, real estate and most other property are not treated as taxable income on your New York or federal income tax return.

There are three nuances. First, income generated by inherited assets is taxable: if you inherit a brokerage account that pays dividends or a rental property that produces rent, the future income those assets generate is taxable to you once you own them. Second, inherited retirement accounts are different. Distributions from an inherited traditional IRA or 401(k) are generally taxable as ordinary income when you withdraw them, because that money was never taxed before. Third, appreciated property usually comes with a “stepped-up” cost basis equal to its fair market value at the date of death, so if you later sell, you usually owe capital gains tax only on appreciation that occurs after the date of death.

Who Pays the New York Estate Tax?

The New York estate tax is owed by the estate of a decedent who was either a New York resident at death, in which case worldwide assets are taxed, or a non-resident who owned real property or tangible personal property physically located in New York, in which case only the New York-situs assets are taxed.

This is why residency and situs rules matter. A Florida resident who owns a Manhattan condominium can have a New York estate tax filing obligation on the value of that New York property, even though Florida itself has no estate tax. Conversely, a genuine change of domicile away from New York — where the person actually relocates their primary home, voting, driver’s license and life — can remove worldwide intangible assets from New York’s reach.

The New York Estate Tax Exemption for 2026

For deaths occurring in 2026, the New York basic exclusion amount is $7.35 million per person, indexed annually for inflation under § 952. If the taxable estate is below the exclusion amount, generally no New York estate tax is due, although a filing may still be required.

By contrast, the federal estate tax exemption for 2026 is $15 million per person, made permanent and indexed for inflation by the One Big Beautiful Bill Act of July 2025. Federal estate tax rates reach 40% on amounts above the federal exemption. New York estate tax rates are graduated and top out at 16%. Both figures are adjusted for inflation every year, so confirm the numbers for the year of death before relying on them.

The New York Estate Tax “Cliff”

The federal system taxes only the amount above the exemption. New York does not. Under § 952, the benefit of the exclusion phases out rapidly once an estate exceeds the exemption, and it disappears entirely once the estate exceeds 105% of the exemption. Above that point the entire estate is taxed, not just the excess. This is the most important trap in New York estate tax planning.

A Worked Example Using the 2026 $7.35M Exemption

In other words, an estate about $367,500 over the exemption can trigger tax on the entire estate. A relatively small amount of additional value — one more piece of real estate, or a life insurance policy owned outright — can push a family off the cliff and create a tax bill larger than the amount by which they went over. Planning to stay below 105% of the exclusion is often the single highest-value step a New Yorker can take.

The Three-Year Gift Add-Back

New Yorkers sometimes assume they can simply give assets away before death to shrink the taxable estate. New York limits this. Under the Tax Law, certain taxable gifts made within three years of death are “added back” into the New York gross estate when the estate tax is calculated. The rule exists to prevent deathbed transfers that would otherwise avoid the tax.

Gifts within the federal annual exclusion, the per-recipient amount you can give each year without filing a gift tax return, are generally not caught by the add-back, and the rule has specific timing and effective-date limits. Because the details are technical and have changed over time, lifetime gifting as a New York estate tax strategy should be checked against the current statute before you rely on it.

New York Has No Portability

At the federal level, a surviving spouse can use the deceased spouse’s unused exemption through an election called “portability.” The election is made on the federal estate tax return, IRS Form 706 (not Form 4768, which is merely the application for an extension of time to file or pay). Portability effectively lets a married couple shelter close to twice the federal exemption.

New York does not offer portability. If the first spouse to die leaves everything outright to the survivor and uses the unlimited marital deduction, that first spouse’s $7.35 million New York exemption is simply lost. When the second spouse later dies, only one exemption is available, which can waste millions of dollars of shelter.

Planning Around the Lack of Portability

Because New York will not give a married couple a second exemption automatically, couples usually recapture it through trust planning rather than by leaving everything outright. Three approaches are common.

Credit shelter (bypass) trust

On the first death, an amount up to the New York exemption is funded into a trust for the surviving spouse’s benefit instead of passing outright. Those assets are sheltered by the first spouse’s exemption and are not included in the survivor’s taxable estate, so both exemptions are preserved.

QTIP-election trust

New York permits a separate state QTIP election, which allows the tax to be deferred to the second death while still controlling where the assets ultimately go. This is useful for blended families and for fine-tuning an estate around the cliff.

Disclaimer-based planning

A surviving spouse can disclaim assets into a credit shelter trust. That leaves the family free to decide after the first death how much exemption to use, based on the law and the family’s circumstances at that time.

Charitable bequests and the marital deduction also reduce a taxable estate, and in a cliff situation a modest charitable gift can sometimes save far more in tax than the gift itself costs. For a deeper look, see our overview of advanced New York estate planning techniques and our discussion of the advantages and disadvantages of creating a testamentary trust.

Related Questions

Are joint bank accounts taxed when someone dies in New York?

Joint accounts raise their own questions, both for estate tax inclusion and for the beneficiaries. We cover them separately in are joint bank accounts subject to inheritance tax?

Is inherited money taxable income in New York?

No. The estate tax is a transfer tax, not an income tax, and inherited money is not reported as income. Income later earned on inherited assets, and distributions from inherited pre-tax retirement accounts, can be taxable, as explained above.

Will moving to Florida avoid the New York estate tax?

A genuine change of domicile can remove worldwide intangible assets from New York’s estate tax. But New York scrutinizes domicile claims, and real property physically located in New York remains subject to New York estate tax regardless of where the owner lived. Moving is a planning option, not a loophole, and it has to be done thoroughly.

Speak With a New York Estate Tax Attorney

Families with estates approaching or exceeding the New York exemption should plan well before death, because the cliff and the lack of portability punish those who wait. To discuss your situation, call the Law Offices of Albert Goodwin at 212-233-1233 or email [email protected].