Twelve states and the District of Columbia levy their own state estate tax, and their exemption thresholds sit far below the federal $15 million threshold for 2026. Oregon starts taxing estates at just $1 million. Massachusetts starts at $2 million. That means an estate that owes nothing to the IRS can still owe five or six figures to the state, and the rules for who files, what gets taxed, and when it is due vary sharply from one jurisdiction to the next.
Which States Have an Estate Tax
The states currently imposing an estate tax are Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington, along with the District of Columbia. If the deceased lived somewhere else, or owned no property in any of these places, no state estate tax return is required.
Maryland stands apart because it levies both an estate tax and a separate inheritance tax. Estate tax is calculated on the total value of the deceased’s assets before distribution. Inheritance tax depends on who receives the property and their relationship to the deceased. An estate in Maryland can face both.
2026 Exemption Thresholds
The exemption is the value below which an estate owes nothing. Cross it by a dollar, and a return is generally required. The 2026 amounts:
- Connecticut: $15,000,000
- District of Columbia: $4,988,400
- Hawaii: $5,490,000
- Illinois: $4,000,000
- Maine: $7,160,000
- Maryland: $5,000,000
- Massachusetts: $2,000,000
- Minnesota: $3,000,000
- New York: $7,350,000
- Oregon: $1,000,000
- Rhode Island: $1,838,056
- Vermont: $5,000,000
- Washington: $3,076,000
Connecticut’s exemption now matches the federal figure, so its tax reaches only the largest estates. Oregon, Massachusetts, and Rhode Island reach well into the range of ordinary middle-class homeowners, especially in high-cost areas where a house, a retirement account, and a life insurance policy quickly add up. Some exemptions adjust for inflation each year; others are fixed by statute and change only when the legislature acts.
The figure that matters is the gross estate, which includes real estate, retirement accounts, life insurance proceeds, and other assets valued at the date of death. Executors who assume an estate falls short of the threshold without doing the arithmetic sometimes discover a filing obligation months later.
How the Rates Work
Every state uses a graduated rate structure. The lowest marginal rates hover around 0.8 percent in Illinois, Maryland, Massachusetts, and Rhode Island. Top rates climb higher: 12 percent in Maine, 16 percent in most states, 20 percent in Hawaii, and 35 percent in Washington on estates more than $9 million above the threshold.
Because the structure is graduated, only the portion of the estate within each bracket is taxed at that bracket’s rate. An Oregon estate worth $2 million does not pay 10.25 percent on the whole amount. The first $500,000 above the exemption is taxed at 10 percent, the next $500,000 at 10.25 percent. The effective rate on the total estate is always lower than the top marginal rate.
Massachusetts operates a little differently. Rather than a pure exemption, it applies a credit of $99,600 against the calculated tax. The practical effect resembles a $2 million exemption, but the tax is technically computed on the full value of the estate once the threshold is crossed and then reduced by the credit.
New York’s Cliff
New York is the only state with a cliff provision, and it is worth understanding before assuming a mid-sized estate is safe. In most states, exceeding the exemption by a dollar means owing tax on that dollar at the lowest bracket. In New York, once the taxable estate exceeds 105 percent of the exemption, the entire estate becomes taxable from the first dollar. For 2026, the cliff sits at $7,717,500.
An estate worth $7,350,000 owes nothing. An estate worth $7,720,000 owes tax on all $7,720,000, not just the $370,000 overage. A modest increase in value can produce a tax bill in the hundreds of thousands. Strategic charitable bequests, lifetime gifts, or trust funding that keep the estate below the cliff can eliminate the tax entirely.
The Portability Trap for Married Couples
Federal law lets a surviving spouse inherit the deceased spouse’s unused estate tax exemption through a portability election, effectively doubling the couple’s combined federal exemption to $30 million. Almost no state with an estate tax recognizes this. Hawaii is the exception.
In every other estate-tax state, each spouse’s exemption belongs only to that spouse and disappears at death if unused. Consider a married couple in Oregon with $2 million in combined assets who leave everything to each other. The first death triggers no tax because of the marital deduction. But the surviving spouse now owns a $2 million estate protected by only a single $1 million exemption, and the extra million is exposed to Oregon estate tax at rates starting at 10 percent.
The standard fix is a credit shelter trust, sometimes called a bypass trust or family trust, funded at the first spouse’s death with an amount equal to the state exemption. Assets in the trust are excluded from the surviving spouse’s taxable estate while still providing income and support during their lifetime. Without this planning, couples in estate-tax states can forfeit one full exemption, a mistake worth anywhere from $30,000 to more than $500,000 depending on the state and the size of the estate.
Which State Taxes Which Assets
State estate tax reach depends on situs, meaning where property is legally located for tax purposes. The rules divide cleanly.
Real estate is taxed in the state where the land sits. Someone who lives in a state with no estate tax but owns a vacation cottage in Maine can trigger a Maine filing obligation on that property alone. Tangible personal property like vehicles, art, and jewelry follows the same rule: taxed where physically kept at the time of death.
Intangible assets like stocks, bonds, mutual funds, and bank accounts are generally taxed only in the state of the deceased’s legal domicile. Domicile disputes get heated when someone split time between two homes, and tax authorities look at where the person voted, held a driver’s license, and kept their primary residence.
When an estate holds property in more than one taxing state, each state applies an apportionment formula, roughly the value of property in that state divided by the total gross estate, multiplied by what the full tax would be if the entire estate were taxable there. The arithmetic gets complicated fast with real property in several states, intangible assets tied to the domicile, and trust interests crossing lines.
Deductions That Reduce the Taxable Estate
State estate taxes generally follow the federal pattern in allowing deductions, though not every state permits every federal deduction and some impose their own caps. The main categories:
- The marital deduction, which lets property pass to a surviving spouse free of tax and defers the bill to the second death. This is the deduction that creates the portability trap above.
- The charitable deduction, which reduces the taxable estate dollar-for-dollar for bequests to qualified charities. For estates near New York’s cliff, a charitable gift can wipe out the entire state tax.
- Debts and mortgages, including credit card balances and medical bills owed by the deceased.
- Administration expenses such as attorney fees, executor commissions, appraisals, and court costs.
- Reasonable funeral and burial expenses.
Deadlines, Extensions, and Penalties
The standard deadline to file the state estate tax return and pay the tax is nine months after the date of death, matching the federal timeline. Executors should confirm the exact date for each state where a return is due.
Extensions to file are generally available, but an extension of time to file is not an extension of time to pay. If the executor needs more months to finalize appraisals, the state will usually grant them, but the estimated tax is still due at the nine-month mark. Anything unpaid at that point accrues interest and may trigger late-payment penalties.
Late-filing penalties across estate-tax states typically start at 5 percent of the unpaid tax for the first month and grow with each additional month, often capping around 20 to 25 percent of the tax due. Interest on unpaid balances generally runs between 5 and 11 percent annually. Willful failure to file or filing a fraudulent return can push penalties to 100 percent of the tax owed or more.
Once the state accepts the return, it issues a closing letter or tax clearance certificate confirming the estate’s obligation is satisfied. Some states require this certificate before real property can be transferred out of the estate, so it is a practical prerequisite for distribution, not just a receipt. If several months pass after filing with no letter, follow up with the state tax agency before releasing property to beneficiaries.