Although the federal estate tax is getting all the attention nowadays, a bulk of death tax activity affecting Americans is happening at the state level.
Only a minority of states (21 plus D.C) currently have a "death tax"—referring collectively to estate and inheritance taxes. And a number of those states recently raised their exemption amount to exclude a large majority of their residents from the tax. The latest state to eliminate its tax is Ohio.
Most states had death taxes prior to 2005, but 25 states lost their estate tax on Dec. 31, 2004, when Congress repealed the state death tax credit as part of the EGTRRA (Economic Growth and Tax Relief and Reconciliation Act). Prior to 2005, those states tied their estate taxes to the state death tax credit; a type of tax referred to as a "pick-up tax."
The most currently applicable death taxes have exemption amounts ranging from $1 million to $5 million.
Ohio had the lowest of the state exemption amount at $338,333. The tax rate was 6% for estates between $338,334 and $500,000. Net taxable value is taxed at 7% above that. Run the numbers and you'll see how easy it was to hit the estate tax threshold in Ohio.
If you have a house located in Ohio worth $200,000, a car worth $25,000, personal property worth $50,000 and cash and investment property worth another $200,000, your estate of $475,000 would have been subject to the Ohio estate tax. The tax would have come to around $8,200—about 1.7% of the estate's full value.
