New York imposes a state estate tax with a $6.94 million exemption and graduated rates up to an effective 16%. The defining feature of New York's estate tax is the 105% cliff: if your taxable estate exceeds $7,287,000, the entire exemption vanishes and the estate is taxed from dollar one. New York has no portability between spouses, no gift tax (but a 3-year clawback), and some of the most aggressive residency audits in the country.
I created this calculator specifically to model the cliff's devastating impact. Enter your estate details below to see the precise bracket-by-bracket tax computation and whether the cliff applies to your situation.
NY Estate Tax Calculator with Cliff Analysis
3-Year Gift Clawback Calculator
New York Estate Tax Guide
New York's Estate Tax Framework
New York imposes an estate tax under EPTL Article 2, Part 1.14 and Tax Law Article 26 on the estates of New York residents and on New York-situs property of non-residents. The tax is reported on Form ET-706, due nine months after the date of death (with a six-month extension available).
The current basic exclusion amount is $6,940,000 (2024). This exemption applies per individual and is not indexed to inflation — it is set by statute and adjusted periodically by the legislature. The exemption was frozen at $5.25 million from 2014-2016, then increased in steps to the current level.
Key Features of the NY Estate Tax
- Graduated rates: The tax is calculated using the pre-2001 federal state death tax credit table (IRC § 2011 as in effect before EGTRRA), then a credit equivalent to the exclusion amount is subtracted. Effective rates range from approximately 3.06% to 16%.
- 105% cliff: If the taxable estate exceeds 105% of the exclusion amount ($7,287,000), the entire exclusion is lost. This is the most dangerous feature of New York's estate tax system.
- No portability: Unlike the federal system, unused NY exemption cannot transfer to a surviving spouse. Credit shelter trusts are essential.
- Credit-not-deduction: The exemption functions as a credit against tax, not a deduction from the estate. This affects marginal rate calculations.
- 3-year gift clawback: Taxable gifts by NY residents made within three years of death are added back to the estate for NY tax purposes.
- No gift tax: New York repealed its separate gift tax in 2000, making lifetime gifting (more than 3 years before death) a powerful planning tool.
NY Estate Tax Bracket Table
The New York estate tax uses the following graduated brackets. The tax is computed on the full taxable estate (when over the exemption), then a credit equal to the tax on $6.94M is subtracted:
| Taxable Estate Range | Base Tax | Rate on Excess |
|---|---|---|
| $0 – $500,000 | $0 | 3.06% |
| $500,001 – $1,000,000 | $15,300 | 5.00% |
| $1,000,001 – $1,500,000 | $40,300 | 5.50% |
| $1,500,001 – $2,100,000 | $67,800 | 6.00% |
| $2,100,001 – $2,600,000 | $103,800 | 6.50% |
| $2,600,001 – $3,100,000 | $136,300 | 7.00% |
| $3,100,001 – $3,600,000 | $171,300 | 7.50% |
| $3,600,001 – $4,100,000 | $208,800 | 8.00% |
| $4,100,001 – $5,100,000 | $248,800 | 8.50% |
| $5,100,001 – $6,100,000 | $333,800 | 9.00% |
| $6,100,001 – $7,100,000 | $423,800 | 9.50% |
| $7,100,001 – $8,100,000 | $518,800 | 10.00% |
| $8,100,001 – $9,100,000 | $618,800 | 10.50% |
| $9,100,001 – $10,100,000 | $723,800 | 11.00% |
| $10,100,001+ | $833,800 | 11.50% |
Note: An additional surcharge applies to estates above $10.1 million that brings the effective top rate to approximately 16%. The surcharge is calculated as a percentage increase on the base tax to reach the statutory maximum.
The NY exemption works as a credit against tax, not as a deduction from the taxable estate. The gross tax is computed on the entire taxable estate, then the credit (equal to the tax on a $6.94M estate) is subtracted. When the estate exceeds the cliff threshold, this credit is eliminated entirely.
The 105% Cliff: New York's Most Dangerous Tax Provision
Under NY Tax Law § 952, if the New York taxable estate exceeds 105% of the basic exclusion amount, the exclusion is reduced to zero. For the current $6.94M exemption, this threshold is:
$6,940,000 × 105% = $7,287,000
How the Cliff Creates a Tax Trap
The cliff creates an extraordinary situation where a small increase in estate value can generate a tax bill many times larger than the increase itself. Consider these examples:
| Taxable Estate | Above/Below Cliff | NY Estate Tax | Effective Rate |
|---|---|---|---|
| $6,940,000 | At exemption | $0 | 0% |
| $7,000,000 | Below cliff (102%) | $0 | 0% |
| $7,200,000 | Below cliff (104%) | $0 | 0% |
| $7,287,000 | AT CLIFF (105%) | ~$452,700 | 6.21% |
| $7,500,000 | Above cliff | ~$474,750 | 6.33% |
| $8,000,000 | Above cliff | ~$529,500 | 6.62% |
| $10,000,000 | Above cliff | ~$758,800 | 7.59% |
The Math Is Devastating
Going from $7,200,000 (no tax) to $7,300,000 (above cliff) — an increase of just $100,000 — generates approximately $455,000 in NY estate tax. That is an effective marginal rate of 455% on the $100,000 increment.
This is why the cliff is the single most important feature to understand in New York estate tax planning. Every estate remotely near the $6.94M-$7.3M range must be planned with extreme precision.
Strategies to Stay Below the Cliff
- Charitable bequests: A charitable bequest sufficient to bring the taxable estate below $6.94M can eliminate the entire NY estate tax. A $500,000 charitable bequest on a $7.4M estate saves the entire ~$460,000 tax bill.
- Lifetime gifting (3+ years before death): Gifts made more than three years before death permanently reduce the NY taxable estate. Annual exclusion gifts ($18,000 per recipient in 2024) do not count as taxable gifts.
- Disclaimer planning: A beneficiary can disclaim (refuse) enough of the inheritance to bring the taxable estate below the cliff threshold. The disclaimed amount passes to the contingent beneficiary.
- ILIT (Irrevocable Life Insurance Trust): Life insurance owned by an ILIT is excluded from the taxable estate, preventing insurance proceeds from pushing the estate over the cliff.
- Formula clauses: Wills and trusts can include formula clauses that automatically adjust bequests to keep the estate at or below the cliff threshold.
The cliff applies to the taxable estate after all deductions — not the gross estate. Maximizing deductions (debts, expenses, charitable gifts, marital deduction) can bring the taxable estate below the threshold even when the gross estate significantly exceeds it.
The 3-Year Gift Clawback Rule
Under EPTL 2-1.14(b), any taxable gifts made by a New York domiciliary within three years of death are "added back" to the gross estate for purposes of computing the New York estate tax. This provision was enacted in 2014 when New York increased its estate tax exemption, to prevent deathbed gifting from circumventing the tax.
Mechanics of the Clawback
- Applies to NY residents only. Gifts of NY real property by non-residents are not subject to the clawback.
- Applies to taxable gifts. Gifts within the federal annual exclusion ($18,000 per recipient in 2024) are not taxable gifts and are not added back. Gifts to spouses (qualifying for the marital deduction) are also excluded.
- Three-year measurement period. The lookback period runs exactly three years from the date of death. A gift made on January 15, 2022 is outside the window for a death on January 16, 2025, but inside the window for a death on January 14, 2025.
- Effective date: April 1, 2014. Only gifts made on or after April 1, 2014 are subject to the clawback.
- Cliff interaction: Clawed-back gifts can push the estate over the 105% cliff threshold, converting what appeared to be a tax-free estate into one with a substantial tax bill.
Clawback Cliff Example
Consider a New York resident who dies in 2024 with an estate of $6.5 million (below the $6.94M exemption). If this person made a $1 million gift two years before death, the clawback adds $1 million back, creating a taxable estate of $7.5 million. This exceeds the 105% cliff ($7,287,000), and the entire exemption is lost. The NY estate tax on $7.5 million is approximately $474,750.
Without the clawback, the estate tax would have been $0. The gift actually increased the family's tax burden by $474,750.
The clawback makes gifts within three years of death potentially counterproductive for NY estates near the cliff zone. Never make large gifts if you are in declining health without carefully modeling the clawback impact. The calculator above specifically analyzes this scenario.
Planning Around the Clawback
- Gift early: Gifts made more than 3 years before death are permanently outside the clawback. Front-load gifting when healthy.
- Use annual exclusions: Annual exclusion gifts are not taxable gifts and are not subject to the clawback. A couple can give $36,000 per recipient per year without triggering the clawback.
- Direct tuition/medical payments: Payments directly to educational institutions or medical providers under IRC § 2503(e) are not taxable gifts and are not clawed back.
- ILIT premium payments: Life insurance premiums paid to an ILIT more than 3 years before death remove both the premiums and the proceeds from the estate.
- Gift to non-NY trusts: Consider whether the gift situs affects the clawback analysis (consult an attorney for complex scenarios).
Coordinating NY and Federal Estate Tax
For 2024, the federal estate tax exemption is $13.61 million per person — nearly double New York's $6.94 million. This creates three planning zones:
| Estate Size | Federal Tax | NY Tax | Planning Focus |
|---|---|---|---|
| Under $6.94M | None | None | Preserve NY exemption with credit shelter trust |
| $6.94M – $13.61M | None | NY tax applies | Minimize NY tax; cliff avoidance critical |
| Over $13.61M | Federal tax applies | NY tax applies | Minimize both; NY tax deductible for federal |
The TCJA Sunset (2026)
The federal exemption is scheduled to drop to approximately $7 million in 2026 when the TCJA provisions sunset. This would dramatically change the planning landscape:
- The "NY-only" zone ($6.94M-$13.61M) would virtually disappear
- Most estates subject to NY tax would also face federal tax
- Combined effective rates could reach 50%+ (40% federal + state)
- Pre-sunset gifting becomes urgently important
NY Estate Tax as Federal Deduction
New York estate tax paid is deductible on the federal estate tax return (Form 706) as an administration expense or debt against the estate. This reduces the federal taxable estate, creating an iterative calculation. For estates above the federal exemption, this interaction can reduce the combined effective rate.
Independent QTIP Elections
Executors can make independent QTIP elections for New York and federal purposes. This means property can be treated as QTIP for federal purposes (deferring federal tax) while not being elected as QTIP for New York purposes (using the first spouse's NY exemption). This is a powerful tool when the exemption amounts differ significantly between the two systems.
The federal system allows the surviving spouse to elect portability and use the deceased spouse's unused exemption (DSUE). New York has no portability. This means that at the federal level, a married couple has an effective $27.22M combined exemption — while at the NY level, it is only $6.94M unless a credit shelter trust is used.
Credit Shelter Trust (Bypass Trust)
Because New York does not allow portability, a credit shelter trust is the most critical planning tool for married couples. At the first spouse's death, assets up to the NY exemption ($6.94M) are placed in the credit shelter trust. These assets are excluded from the surviving spouse's estate, effectively doubling the couple's NY exemption to $13.88M.
Without a credit shelter trust, the first spouse's NY exemption is permanently lost, and the surviving spouse's estate bears the full tax burden. For an estate of $12 million, this could mean the difference between $0 in NY estate tax (with a properly funded trust) and approximately $600,000+ in tax (without one).
Disclaimer Trust
A disclaimer trust provides flexibility when the optimal plan is uncertain at the first spouse's death. The surviving spouse can disclaim (refuse) a portion of the inheritance, causing it to pass to a trust. This is useful when:
- The estate size is uncertain (pending business valuations, litigation, etc.)
- The cliff threshold may change before the surviving spouse's death
- The surviving spouse may remarry, changing the planning calculus
The disclaimer must be made within nine months of death under EPTL 2-1.11 and must meet federal requirements under IRC § 2518.
Irrevocable Life Insurance Trust (ILIT)
Life insurance proceeds are included in the gross estate if the decedent held any "incidents of ownership" in the policy. For estates near the cliff threshold, a $500,000 life insurance policy could push the estate over the cliff, generating $450,000+ in tax. An ILIT removes the insurance from the estate entirely.
The ILIT must own the policy for at least three years before death (the federal 3-year rule under IRC § 2035). New premiums paid to the ILIT should use Crummey notices to qualify for the annual exclusion.
GRAT (Grantor Retained Annuity Trust)
A GRAT allows the transfer of appreciating assets out of the estate at a low gift tax cost. The grantor retains an annuity for a term of years, and remaining assets pass to beneficiaries. A "zeroed-out" GRAT has a gift tax value of approximately zero. If the assets outperform the 7520 rate, the excess passes to beneficiaries free of estate and gift tax.
QPRT (Qualified Personal Residence Trust)
A QPRT transfers a personal residence to beneficiaries at a discounted value. The grantor retains the right to live in the home for a specified term. If the grantor survives the term, the home is removed from the estate. In the New York City real estate market, QPRTs can generate significant estate tax savings.
New York has its own version of the Incomplete Gift Non-Grantor (ING) trust — sometimes called a NY ING or NING trust — designed to move income-producing assets to a no-income-tax state trust while maintaining the gift as incomplete for gift tax purposes. Unlike California (which enacted SB 131 to kill these trusts), New York has not attacked ING trusts, though care is needed with residency and situs analysis.
Trap #1: No Portability
This bears repeating because it is the single most common planning failure in New York: the first spouse's NY exemption is not portable. Married couples who rely on the federal portability election and leave everything to the surviving spouse outright will lose the first spouse's $6.94M NY exemption permanently. Every married couple with a combined estate potentially exceeding $6.94M needs a credit shelter trust provision in their estate plan.
Trap #2: Residency Audits
New York's Department of Taxation and Finance aggressively audits domicile claims. If you maintain that you moved to Florida, New Jersey, or another state to avoid the NY estate tax, expect scrutiny. The audit examines:
- Home test: Where you maintain your primary residence and the relative size/value of NY vs. non-NY homes
- Business test: Where your business activities, office, and professional relationships are located
- Time test: Day-by-day analysis of where you physically spend time (cell phone records, credit card statements, EZ-Pass records)
- Near and dear test: Where your family members, social clubs, religious organizations, and personal items are located
- Active involvement test: Voter registration, driver's license, vehicle registration, doctors, accountants, lawyers
A failed domicile audit means the entire worldwide estate is subject to NY estate tax. For a $10M estate, that is approximately $758,800 in NY tax that could have been avoided.
Trap #3: The Gift Clawback Cliff Interaction
As discussed in the Clawback tab, gifts within three years of death are added back. The devastating trap occurs when the estate appears to be below the exemption, but clawed-back gifts push it over the cliff. Always model the clawback before making large gifts, and consider the possibility of death within three years.
Trap #4: NYC Transfer Taxes on Lifetime Transfers
New York City imposes the Real Property Transfer Tax (RPTT) on transfers of real property, including many gift transfers. The RPTT rates are:
- Residential: 1.0% on transfers up to $500,000; 1.425% on transfers above $500,000
- Commercial: 1.425% on transfers up to $500,000; 2.625% on transfers above $500,000
The NYS transfer tax ($2 per $500 of consideration) and the mansion tax (1% on sales of $1M+ residential property) also apply. Death transfers are generally exempt, but lifetime gift transfers may not be. Always analyze transfer tax implications before gifting NYC real property.
Trap #5: Non-Resident NY Real Property
Non-residents who own real property or tangible personal property in New York are subject to NY estate tax on that property. The tax is computed on the entire estate as if the person were a NY resident, then prorated. A Florida resident who owns a $2M NYC apartment and has a $10M total estate faces NY estate tax on a pro rata share — not just on the $2M value.
Non-residents can potentially avoid NY situs by holding real property through an LLC (which is intangible personal property, not real property). However, the IRS and NY DTF scrutinize these structures, and the LLC must have economic substance beyond tax avoidance. Consult an attorney before implementing this strategy.
Related Resources
Frequently Asked Questions: New York Estate Tax
Yes. New York imposes a state estate tax under EPTL Article 2, Part 1.14 and Tax Law Article 26. The current exemption is $6.94 million per person. Graduated rates range from approximately 3.06% to an effective 16%, and the 105% cliff provision eliminates the entire exemption when the estate exceeds $7,287,000.
If the NY taxable estate exceeds 105% of the exemption ($7,287,000), the entire $6.94M exemption vanishes. The estate is taxed from dollar one. A $7.3M estate owes ~$455K in NY tax, while a $6.94M estate owes nothing. The effective marginal rate on the $360K increment exceeds 126%.
No. New York does not allow portability of the estate tax exemption between spouses. A credit shelter trust is essential for married couples to use both spouses' $6.94M exemptions, creating an effective $13.88M combined exemption.
Under EPTL 2-1.14(b), taxable gifts by NY residents made within 3 years of death are added back to the estate. This can push the estate over the 105% cliff. Annual exclusion gifts ($18K/recipient) and direct tuition/medical payments are not affected.
No. New York repealed its gift tax in 2000. However, the 3-year clawback effectively recaptures large gifts made near death. Gifts more than 3 years before death permanently reduce the NY taxable estate.
Form ET-706 is due within 9 months of the date of death. A 6-month extension may be obtained by filing a request before the due date. Interest accrues on unpaid tax from the original due date.
Yes. Non-residents with NY real property or tangible personal property in NY face prorated estate tax. The tax is computed on the entire estate, then allocated based on the NY property percentage of the total estate.
NY DTF uses a multi-factor analysis: home test (where you maintain residences), business test, time test (day-by-day tracking via cell records, credit cards, EZ-Pass), near and dear items test, and active involvement test (voter registration, doctors, etc.). A failed audit taxes the entire worldwide estate.
A credit shelter trust (bypass trust) holds assets up to the exemption amount at the first spouse's death. These assets are excluded from the surviving spouse's estate, effectively doubling the couple's NY exemption to $13.88M. Essential because NY has no portability.
New Jersey repealed its estate tax effective January 1, 2018. NJ retains an inheritance tax on transfers to certain non-exempt beneficiaries. NY keeps its estate tax with the $6.94M exemption and cliff. NJ domicile avoids the estate tax but may trigger inheritance tax.
A 1% transfer tax on residential property purchases of $1M+ under Tax Law § 1402-a. In addition, NYC imposes RPTT (1%-2.625% depending on value and property type). Death transfers are generally exempt from these transfer taxes.
A QTIP trust provides income to the surviving spouse for life with remainder to chosen beneficiaries. Executors can make independent NY and federal QTIP elections, allowing optimization of both exemptions. This is a key tool when NY ($6.94M) and federal ($13.61M) exemptions differ.
No. New York does not impose an inheritance tax. The estate tax is paid by the estate itself, not by individual beneficiaries. This differs from states like Pennsylvania and New Jersey, which tax recipients based on their relationship to the decedent.
Yes. Under EPTL 2-1.11, a beneficiary can disclaim within 9 months of death. This is a powerful post-mortem tool — a beneficiary can disclaim enough to bring the estate below the cliff threshold, redirecting assets to a credit shelter trust or other beneficiaries.
If the federal exemption drops to ~$7M in 2026, nearly every estate subject to NY tax will also face federal tax. The "NY-only" zone ($6.94M-$13.61M) disappears. Combined rates could exceed 50%. Pre-sunset gifting is critical.
An ILIT removes life insurance from the taxable estate. For estates near the cliff, even a modest insurance policy can push the estate over $7.287M. The ILIT must own the policy for 3+ years and use Crummey notices for premium gifts.
The NY real estate transfer tax is $2 per $500 of consideration (0.4%). NYC adds the RPTT: 1%-1.425% for residential, 1.425%-2.625% for commercial. The mansion tax adds 1% on residential sales of $1M+. Death transfers are generally exempt.
Potentially. An LLC interest is intangible personal property, which may not be NY-situs for a non-resident. However, NY and the IRS scrutinize LLCs that hold real property, and the entity must have economic substance. This strategy requires careful legal structuring.
Inherited property receives a stepped-up basis to fair market value at death under IRC § 1014. NY conforms to the federal step-up. This eliminates capital gains tax on appreciation during the decedent's lifetime, which can save 20-30%+ in combined federal and NY income taxes on the gain.
Charitable bequests reduce the taxable estate. A carefully sized charitable bequest can bring the taxable estate below the cliff threshold. For a $7.5M estate, a $600K charitable bequest eliminates the entire ~$474K NY estate tax — the charity effectively receives $600K that would have been split between tax and inheritance anyway.
New York Estate Tax Planning Consultation
I can help analyze your New York estate tax exposure, model the cliff, and structure trusts and gifting strategies. $240/hour.