New York Estate Tax Cliff Calculator — The 105% Rule

New York’s estate tax has a feature that surprises almost everyone: the cliff. In most tax systems, only the amount above an exemption is taxed. Not here. Under New York Tax Law § 952, once a taxable estate exceeds 105% of the basic exclusion amount, the exclusion disappears entirely and the whole estate is taxed from the first dollar. In the narrow band between 100% and 105% of the exclusion, the benefit phases out so quickly that each extra dollar of estate can cost roughly two dollars of tax — a marginal rate near 200%.

How the Cliff Works

The mechanics come from the way § 952 grants its credit:

• At or below the exclusion: no New York estate tax at all.
• Above 105% of the exclusion: no credit at all — the entire estate is taxed under the rate table below, starting from the first dollar.
• Between 100% and 105%: the credit phases out proportionally. Because the entire credit vanishes over a band equal to just 5% of the exclusion, every dollar in that band carries an effective marginal rate of roughly 200%.

Worked Examples (2025 exclusion of $7,160,000)

• Estate of $7,160,000 (exactly the exclusion): New York estate tax is $0.
• Estate of $7,300,000 ($140,000 over): the phased credit leaves a tax of about $277,000. The extra $140,000 of estate generated $277,000 of tax — the heirs receive less than if the estate had been $140,000 smaller.
• Estate of $7,518,000 (105% of the exclusion): the credit is fully gone. Tax is about $708,000 — computed on the entire estate, not just the excess.
• Estate of $10,000,000: tax of about $1,067,600, again on the full amount.

New York Estate Tax Rate Table (Tax Law § 952(b))

Planning Around the Cliff

Because the cliff punishes estates just over the line, planning near the threshold has outsized value:

• Lifetime gifts can bring an estate back under the exclusion — but beware the add-back: under Tax Law § 954, taxable gifts made within three years of death are pulled back into the New York gross estate.
• New York has no portability. Unlike the federal exemption, a deceased spouse’s unused New York exclusion does not carry over — credit shelter planning still matters for New York couples even when it no longer matters federally.
• Charitable bequests reduce the taxable estate dollar for dollar, and a “Santa Clause” provision — a conditional charitable bequest of the amount above the cliff — can cap the estate at the threshold when that leaves more for the family than paying the tax.
• The federal estate tax exemption is far higher than New York’s, so many estates owe New York estate tax while owing nothing federally.

See also our overview of how to save money on estate taxes and New York estate tax rates and thresholds.

This calculator is a planning estimate based on the § 952 rate table and credit phase-out; it does not account for deductions, the gift add-back, prior transfers, or federal interplay. If your estate is anywhere near the exclusion amount, we at the Law Offices of Albert Goodwin are here for you. You can call us at 212-233-1233 or send us an email at [email protected].