New York's Estate Tax Cliff Begins One Dollar Past $7,350,000

New York's basic exclusion from its estate tax is $7,350,000 for deaths in 2026, per the Tax Department's published schedule. An estate of $7,360,000, ten thousand dollars over, owes $28,560. At $7,500,000 the bill is $386,400. At $7,717,500, which is 105% of the exclusion, the credit is gone, and the whole estate is taxed from its first dollar: $734,780. The widely repeated version of this rule (nothing owed until 105%, then everything) has the geometry backwards. The climb happens inside the 100%-to-105% band, and it is steepest at the band's first dollar.

The credit is the cliff

Section 952 imposes the tax through a bracket schedule running from 3.06% to 16%, then hands every estate a credit. Under §952(c), an estate at or below the basic exclusion amount gets a credit equal to its entire tax, which is why estates under the line owe nothing. An estate above the exclusion gets a smaller credit: the tax that would be due on the exclusion "multiplied by one minus a fraction" whose numerator is the overage and whose denominator is 5% of the exclusion. Dividing by 5% is multiplying by 20, so the statute collapses to one rule: every dollar of estate above $7,350,000 removes $20 from the amount the credit shelters. And once a taxable estate "exceeds one hundred five percent of the basic exclusion amount," §952(c)(1) allows no credit at all.

For a $7,500,000 taxable estate with a 2026 date of death, the computation runs:

• Tax on $7,500,000 from the §952(b) schedule: $650,800 + 13.6% × $400,000 = $705,200
• Overage above the exclusion: $7,500,000 − $7,350,000 = $150,000
• Sheltered amount after the claw-back: $7,350,000 − (20 × $150,000) = $4,350,000
• Credit, the §952(b) tax on that sheltered amount: $290,800 + 11.2% × $250,000 = $318,800
• New York estate tax: $705,200 − $318,800 = $386,400

The climb is front-loaded. The first $10,000 over the exclusion carries $28,560 of tax, $2.86 per dollar; near the top of the band the marginal cost eases to about 75 cents per dollar; across the whole band, from $7,350,000 (tax: $0) to $7,717,500 (tax: $734,780), it averages $2.00 per dollar almost exactly.

What a 2026 death owes, from the §952(b) schedule

The statutory table prints each band as a formula. An $8,000,000 estate, for example, falls in the "over $7,100,000 but not over $8,100,000" row, which reads $650,800 plus 13.6% of the excess. Applying the schedule and the credit rule:

The federal estate tax on every row of this table is $0. Each estate sits at or under the federal exclusion, which is $15,000,000 for deaths after December 31, 2025.

Federal law runs the other way

Section 70106 of the One Big Beautiful Bill Act rewrote §2010(c)(3): a $15,000,000 exclusion for deaths after December 31, 2025, indexed after 2026 and rounded to the nearest $10,000. No expiration is written into the rewritten section. The federal credit never phases out, so the 40% top rate of §2001(c) reaches the excess alone: a $16,000,000 estate is taxed on $1,000,000, and the $8,000,000 estate that owes New York $773,200 owes the federal government nothing.

Federal law also lets the exclusion move between spouses. Under §2010(c), whatever exclusion the first spouse to die leaves unused passes to the survivor, provided the executor files Form 706 and makes the irrevocable election on it; a married couple can shelter $30,000,000, and the IRS's estate and gift tax pages collect the filing mechanics. Article 26 of New York's Tax Law has no counterpart. An exclusion unused at the first death is gone.

The second death is the expensive one

The absence of portability decides what "leave everything to my spouse" costs. A bequest to a surviving spouse who is a U.S. citizen is deductible in full, so the first death is tax-free at any size. The problem arrives at the second, here with 2026 figures at both deaths:

• The first spouse dies holding $6,000,000 and leaves it outright to the survivor. Marital deduction; New York tax: $0. The first spouse's $7,350,000 exclusion shelters nothing and cannot be saved.
• The survivor now holds $11,000,000: the inherited $6,000,000 plus $5,000,000 of their own.
• At the survivor's death, $11,000,000 is past $7,717,500, so no credit exists. The §952(b) tax is $1,082,800 + 16% × $900,000 = $1,226,800.

Had the first $6,000,000 gone into a credit shelter trust for the survivor's benefit instead of to the survivor outright, it would sit outside the survivor's taxable estate; the survivor's own $5,000,000 is under the exclusion, and the New York tax at both deaths is $0. Same family, same assets, $1,226,800 apart. Federal tax is $0 in both versions, since everything is under $15,000,000.

Gifts leave the estate after three years

New York levies no gift tax. What it runs instead is written in §954(a)(3): the New York gross estate is "increased by the amount of any taxable gift ... made during the three year period ending on the decedent's date of death." A gift completed more than three years before death never enters the computation. The add-back skips gifts made before April 1, 2014, gifts made while the decedent was not a New York resident, and real or tangible property sitting outside the state; and as the law stands it sunsets for deaths on or after January 1, 2032. The add-back also feeds the filing test: Form ET-706 is required once the federal gross estate plus included gifts exceeds the exclusion. For an estate hovering near $7,350,000, the three-year clock is why gifting plans reward a head start.

Where the other estate-tax states stand

As of the Tax Foundation's October 2025 survey, twelve states and the District of Columbia impose estate taxes, and five states levy inheritance taxes; Maryland alone does both. Within the twelve, only Connecticut's exemption is higher than New York's, and Oregon's $1,000,000 is the lowest. New York's problem is design rather than size:

• Washington splits calendar 2026 in half. Deaths from January 1 through June 30, 2026 get a $3,076,000 exclusion and a Table W top rate of 35% above $9,000,000; deaths on or after July 1, 2026 get $3,000,000 and a 20% top rate, the 2025 increase having lasted twelve months. The exclusion is no longer indexed (the Department of Revenue attributes the freeze to an expired CPI reference in the statute), and tax falls only on the amount above it.
• Massachusetts pairs its $2,000,000 filing threshold with a flat $99,600 credit for deaths on or after January 1, 2023. That credit does not phase out as the estate grows, where before 2023 an estate over the then-$1,000,000 threshold entered the computation whole, with no such credit. Massachusetts repealed the whole-estate design in 2023; the version New York adopted in 2014 is still running.

What moves an estate back under the line

Near the band, the highest-yield planning is subtraction. Take the $7,500,000 estate: a $150,000 charitable bequest brings the taxable estate to exactly $7,350,000 and the tax to $0. The heirs receive $7,350,000 instead of $7,500,000 − $386,400 = $7,113,600 — $236,400 more because the estate gave $150,000 away. Inside the claw-back band, charity outperforms inheritance.

The other levers follow from the mechanisms above: use both spouses' exclusions with a credit shelter trust, since New York will not port one, and start any gifting program more than three years out, since §954 pulls late gifts back in. Leaving is the bluntest lever, and the most audited. New York treats domicile as "the place you intend to have as your permanent home," keeps it attached until you demonstrate you abandoned it and established a new one, and publishes Nonresident Audit Guidelines for the disputes; its parallel statutory-residence test for income tax counts 184 days of presence, any part of a day included.

Every figure above is pinned to a date of death in 2026 because in this corner of the law the number attaches to the day. New York's exclusion was $7,160,000 for 2025 deaths; the statute resets it each January 1 ($5,000,000 times a cost-of-living factor, rounded to the nearest $10,000), and the Tax Department has not yet published the 2027 amount. Washington's top rate drops fifteen points at midyear. The gift add-back is scheduled to expire for deaths on or after January 1, 2032. Earlier versions of this article showed $0 of tax inside the 100%-to-105% band and understated the tax above it by roughly 40%; the dated corrections are logged at Corrections.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.