New York Inheritance Tax: What Heirs Actually Owe in 2026

Is There an Inheritance Tax in New York?

No. New York does not impose an inheritance tax, so heirs are not taxed on the assets they receive. The distinction matters: an inheritance tax is paid by the person who receives assets, while an estate tax is paid by the estate before anything is distributed to beneficiaries.

Only five states currently levy an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is the only state that imposes both an estate tax and an inheritance tax. If you live in New York and inherit from a New York decedent, the inheritance itself is not a taxable event for you.

That said, the question most New York families actually need to answer is whether the deceased person's estate owes New York estate tax. If it does, the tax bill is paid out of estate assets before you receive your share, which can reduce what you ultimately inherit.

How New York's Estate Tax Works and Who Must File

New York is one of 12 states (plus the District of Columbia) that impose a state-level estate tax. The tax applies to the estate of the deceased person, not to individual heirs.

The Basic Exclusion Amount

The New York estate tax basic exclusion amount for deaths occurring between January 1, 2026, and December 31, 2026, is $7,350,000. For comparison, the 2024 and 2025 exclusion was $6,940,000. If the total value of the estate (plus certain gifts) stays at or below the exclusion, no New York estate tax is owed and no return is required.

Who Must File

Residents: The estate of a New York State resident must file Form ET-706 if the federal gross estate, increased by the amount of any includible gifts, exceeds the basic exclusion amount.

Nonresidents: A nonresident's estate must file if it includes real or tangible personal property physically located in New York and the federal gross estate (plus includible gifts) exceeds the basic exclusion amount.

Filing Deadline

Form ET-706 is due nine months after the date of death. Payment of any tax owed is also due at that time. Extensions for filing are available, but they do not extend the payment deadline. Interest accrues on any unpaid balance from the original due date.

Includible Gifts (Three-Year Add-Back)

For estates of decedents dying before January 1, 2026, New York requires the estate to add back certain taxable gifts made within the three years before death. Specifically, any taxable gift under IRC § 2503 that was made during that window and was not already included in the federal gross estate gets added to the New York gross estate for threshold purposes. However, a gift does not get added back if it was made while the decedent was a nonresident, made before April 1, 2014, or involved real or tangible property located outside New York.

The New York Estate Tax Cliff Explained

New York's estate tax has a feature that catches many families off guard. If the taxable estate exceeds 105% of the basic exclusion amount, the entire exclusion disappears and the full estate becomes taxable from the first dollar.

For 2026, the cliff threshold is 105% of $7,350,000, which equals approximately $7,717,500.

How the Cliff Works: A Concrete Example

Consider two estates, only $300,000 apart:

Estate A exceeds the $7,350,000 exclusion but stays below the 105% cliff. Tax is owed only on the excess above the exclusion. Estate B crosses the 105% line, so the entire $8,000,000 is treated as taxable. The result: adding $300,000 to the estate's value increases the tax bill by roughly $600,000.

This cliff makes planning especially important for estates valued between $7,350,000 and approximately $8,000,000. Strategies such as lifetime gifting, charitable bequests, or irrevocable trust funding may help keep the taxable estate below the cliff. These approaches require guidance from a qualified estate attorney or tax advisor.

New York Estate Tax Rates and How Much Is Owed

New York estate tax rates are graduated, starting at about 3.06% and reaching a maximum of 16% for the largest estates. The rate applies based on the size of the taxable estate (the amount above the exclusion, unless the cliff applies).

Rate Brackets

These are the marginal rates. The actual effective rate depends on the total taxable estate and how much falls into each bracket.

Unlimited Marital Deduction

Assets passing to a surviving spouse (who is a U.S. citizen) qualify for an unlimited marital deduction and are generally not subject to New York estate tax at the first spouse's death. The tax may become relevant when the surviving spouse later passes away and their own estate exceeds the exclusion amount.

Federal Estate Tax

New York estate tax is separate from the federal estate tax. The federal estate tax exemption for 2025 is $13,990,000 per taxpayer, and it is expected to be approximately $15,000,000 for 2026 (subject to final IRS announcement). Estates above that level face a flat 40% federal rate on the excess. Many New York estates owe state estate tax without owing any federal estate tax because the New York threshold is significantly lower.

Inheritance From Out of State and Inherited Property in New York

State death tax generally follows the decedent's state of residence, not the heir's. This means your home state as an heir typically does not determine whether estate tax is owed.

You Live in NY but Inherit From an Out-of-State Decedent

If the person who died was a resident of, say, Florida (a state with no estate tax) and owned no real property in New York, the estate would owe no New York estate tax. Your New York residency as an heir is irrelevant to the estate tax calculation.

A Nonresident Decedent Owned Property in New York

If a nonresident died owning a vacation home, rental property, or other real or tangible personal property in New York, the estate may owe New York estate tax on that property. The tax is generally calculated by applying the New York estate tax rate to the portion of the estate attributable to the New York property.

Step-Up in Basis

Inherited property generally receives a "step-up" in basis to its fair market value as of the date of death. This means that if you inherit a home worth $500,000 and later sell it for $510,000, you'd owe capital gains tax only on the $10,000 gain, not on the original purchase price. Receiving inherited property is generally not treated as taxable income at the time of receipt.

Steps for New York Heirs and Executors

Here's an ordered checklist for handling a New York estate:

1. Locate the will and identify the executor. The executor (or administrator, if there's no will) is responsible for managing the estate and filing tax returns.
2. Value the gross estate. This includes all assets the decedent owned or had an interest in at death: real estate, bank accounts, investments, retirement accounts, life insurance proceeds (if the decedent owned the policy), and personal property.
3. Determine residency and situs of assets. Was the decedent a New York resident? Are there assets located in other states? Both factors affect which states may impose an estate tax.
4. Compare the estate value to the filing threshold. For 2026, the threshold is $7,350,000. Remember to add back any includible taxable gifts made within three years of death. If the total exceeds the exclusion, Form ET-706 must be filed.
5. Identify available deductions. The marital deduction (for assets to a surviving spouse), charitable deductions, debts, funeral expenses, and administration costs can all reduce the taxable estate.
6. File and pay within nine months. The estate tax return and payment are due nine months after the date of death. An extension to file can be requested, but it does not extend the payment due date.
7. Request estate tax lien releases for real property. New York places an automatic lien on real property owned by a decedent. To transfer or sell the property, the executor must file Form ET-30 or Form ET-117 to obtain a release of the estate tax lien.
8. Engage qualified professionals when needed. An estate attorney or CPA is especially valuable for estates near the cliff threshold, estates with multi-state property, estates involving complex trusts, or situations where the three-year gift add-back applies. These professionals can also help with federal estate tax filings when needed.
9. Distribute assets to beneficiaries. After taxes, debts, and expenses are paid, the executor distributes the remaining assets according to the will or, if there's no will, according to New York's intestacy laws.