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

Last updated: January 2025. Reviewed by Albert Goodwin, Esq., New York estate attorney.

New York imposes its own estate tax, separate from the federal estate tax, on the estates of decedents who were New York residents and on New York real and tangible property owned by nonresidents. Whether an estate owes New York estate tax depends on the size of the gross estate compared to that year's basic exclusion amount. This page explains the current thresholds, the full New York estate tax rate schedule, the state's notorious "estate tax cliff," and the planning techniques used to reduce exposure.

The governing statutes are New York Tax Law §§ 952–960. The exclusion amount is indexed and announced each year by the New York State Department of Taxation and Finance.

New York basic exclusion amount by year

If the value of the gross estate is at or below the basic exclusion amount, no New York estate tax is due. The exclusion is adjusted annually for inflation:

Note that New York's exclusion is substantially lower than the federal exclusion ($13.99 million per person in 2025). As a result, many New York estates owe state estate tax even when no federal estate tax is due.

How New York estate tax is calculated

If your estate exceeds the basic exclusion amount but stays below the cliff (described below), only the portion of the estate above the exclusion is taxed. The tax is computed using New York's graduated rate schedule under Tax Law § 952.

New York estate tax rate brackets

The state estate tax applies the following rates to the New York taxable estate:

The New York estate tax "cliff"

New York is one of the few states with an estate tax cliff. If your gross estate exceeds 105% of the basic exclusion amount, you lose the exclusion entirely — the tax is then applied to the whole estate, not just the amount above the exclusion. Going even slightly over the cliff can cost a family hundreds of thousands of dollars.

Worked example (2025 figures)

Suppose a New York resident dies in 2025, when the exclusion is $7,160,000 and the cliff is $7,518,000.

• Estate of $7,400,000 (under the cliff): Only the $240,000 above the exclusion is taxed. At the marginal 13.6% bracket this produces a modest tax of roughly $32,640.
• Estate of $7,600,000 (over the cliff): The exclusion is lost completely. The full $7,600,000 is taxed: $650,800 base tax plus 12.8% of the amount over $7,100,000 ($500,000), for approximately $714,800 in New York estate tax.

A difference of just $200,000 in estate value can swing the tax bill from about $33,000 to over $700,000. This is why estates approaching the exclusion deserve careful planning.

What counts as the gross estate?

To determine whether the cliff applies, you must compute the gross estate — which is broader than the probate estate. The probate estate consists only of assets that pass by will or intestacy. The gross estate includes all property the decedent owned or controlled at death, even assets that bypass probate.

Under New York Tax Law § 954, the gross estate of a resident decedent is the federal gross estate (as defined in the Internal Revenue Code, 26 U.S.C. § 2031), less real or tangible personal property located outside New York, plus property in New York passing under a limited power of appointment exercised by the decedent. The federal gross estate values, as of the date of death, all property real or personal, tangible or intangible, wherever situated.

Assets that bypass probate but are still counted in the gross estate include:

• Jointly held property with rights of survivorship;
• Totten trust (payable-on-death) bank accounts;
• Life insurance proceeds where the decedent retained ownership or incidents of ownership;
• Retirement accounts and annuities;
• Property over which the decedent held a general power of appointment.

New York also adds back certain taxable gifts made within three years of death under Tax Law § 954(a)(3), so deathbed gifting will not avoid the cliff.

Real property in the gross estate

Real estate must be appraised to assign a date-of-death value. That value also becomes the stepped-up basis for heirs and beneficiaries. If the property is mortgaged, the outstanding mortgage is deducted to arrive at the adjusted gross estate, since estate tax is not imposed on debt-encumbered value the decedent did not truly own.

Jointly owned property

Under Treas. Reg. § 20.2040-1, the entire value of jointly held property is included in the decedent's gross estate unless the executor proves the surviving owner contributed consideration, or that the property was received by gift, bequest, devise, or inheritance. Many families are surprised that a joint account funded entirely by the decedent is fully included.

How to avoid the estate tax cliff

Because the cliff penalty is so severe, estates near the threshold often benefit from planning that brings the taxable estate below 105% of the exclusion. Common strategies include:

• Lifetime gifting. Annual exclusion gifts and larger lifetime gifts (made more than three years before death) can remove value from the New York gross estate, since New York has no standalone gift tax.
• Irrevocable trusts. Assets transferred to a properly structured irrevocable trust may be excluded from the gross estate. See our overview of advanced New York estate planning techniques.
• Charitable bequests. A charitable gift that brings the estate below the cliff can preserve the exclusion for the rest of the estate — sometimes the charitable gift effectively costs the family very little because it averts a much larger tax.
• Credit shelter / bypass planning for married couples. Because New York does not allow "portability" of an unused spousal exclusion, couples should consider trust planning so that both spouses' exclusions are used rather than wasted.
• Disclaimers. A qualified disclaimer by a beneficiary can redirect assets in a way that keeps a survivor's estate below the cliff.

These techniques are fact-specific and must be implemented well before death to be effective. Whether a given approach is appropriate depends on the size of the estate, the assets involved, and family circumstances.

Frequently asked questions

Does New York have an inheritance tax?

No. New York imposes an estate tax (paid by the estate), not an inheritance tax (paid by beneficiaries). Beneficiaries generally do not pay New York tax on inherited assets simply for receiving them.

What is the difference between the gross estate and the probate estate?

The probate estate includes only assets passing by will or intestacy. The gross estate includes those assets plus non-probate property such as joint accounts, Totten trusts, and certain life insurance and retirement assets. The cliff is measured against the gross estate.

When is the New York estate tax return due?

Form ET-706 is generally due nine months after the date of death, though a six-month extension to file may be available. Tax owed is still due at the nine-month mark.

Can spouses combine their New York exclusions?

New York does not offer portability between spouses. Without trust-based planning, the first spouse's exclusion can be lost, which is why credit shelter planning matters for larger estates.

Related reading

• Advanced New York Estate Planning Techniques
• How to Avoid Probate in New York
• Benefits of a Living Trust
• What Assets Can and Cannot Go Into a Revocable Trust

Speak with a New York estate planning attorney

For estates approaching the New York exclusion, careful planning can mean the difference between a modest tax and a six-figure cliff penalty. The Law Offices of Albert Goodwin assist clients throughout New York, with offices in Manhattan, Brooklyn, and Queens. Call us at 212-233-1233 or email [email protected].

This page is for general informational purposes regarding New York Tax Law §§ 952–960 and is not legal or tax advice. Exclusion amounts are updated annually by the New York State Department of Taxation and Finance; confirm current figures for the applicable year.