New York Estate Tax: Exclusion Cliff, Rates, and Filing

The New York estate tax applies to estates worth more than $7,350,000 for deaths in 2026, with rates that climb from about 3% to 16% and a “cliff” rule that wipes out the exclusion entirely once an estate exceeds 105% of the threshold.¹ It operates separately from the federal estate tax, so an estate can owe nothing to the IRS and still face a substantial bill in Albany.

The Exclusion Amount and the Cliff

Under New York Tax Law § 952, the basic exclusion starts at $5 million and is adjusted annually for inflation.² For anyone who dies between January 1 and December 31, 2026, that figure is $7,350,000. Estates at or below the exclusion owe no New York estate tax.

The cliff is what makes this system unusually unforgiving. Once the taxable estate exceeds 105% of the exclusion, the exclusion disappears entirely and tax applies from dollar one. For 2026, the tipping point is $7,717,500. An estate worth $7,350,000 pays nothing. An estate worth $7,718,000 loses the full exclusion and owes tax on its entire value, with a bill that can easily top $400,000. Precise valuation matters enormously for estates anywhere near the line, because a small swing in appraisals can change the tax by six figures.

What Counts as Part of the Estate

For New York residents, the gross estate includes almost everything the person owned at death: bank accounts, brokerage holdings, retirement accounts, life insurance (where the decedent held incidents of ownership), real estate, vehicles, jewelry, and art.³ Stocks and bonds count regardless of where the custodian sits. Real estate and tangible personal property located outside New York are subtracted.

Nonresidents are taxed only on real or tangible property physically located in New York, plus intangible property used in a New York business.¹ A nonresident who owns a Manhattan apartment but keeps all financial accounts elsewhere is taxed only on the apartment. Stock portfolios held by nonresidents generally fall outside New York’s reach.

Three-Year Look-Back on Gifts

New York adds certain lifetime gifts back into the estate. Taxable gifts made during the three years before death, while the decedent was a New York resident, are pulled back into the gross estate.³ Gifts made while the person lived outside New York, and gifts of real or tangible property located outside the state at the time of the gift, are excluded. The look-back rule is scheduled to expire for deaths on or after January 1, 2032. Until then, a late-in-life gift can push an otherwise exempt estate over the cliff.

Deductions That Reduce the Taxable Estate

The taxable estate is not the gross estate. New York generally follows the federal deduction framework.⁴ The main categories:

Debts of the decedent, including mortgages, credit card balances, and medical bills owed at death.
Funeral costs, executor commissions, attorney and accounting fees, and court costs.
Property passing to a surviving spouse who is a U.S. citizen qualifies for an unlimited marital deduction. If the surviving spouse is not a U.S. citizen, a Qualified Domestic Trust is required to claim the deduction for deaths on or after July 1, 2025.
Bequests to qualifying charities, which are fully deductible.

The marital deduction carries a New York-specific wrinkle. If the first spouse’s estate elected QTIP treatment for New York purposes, those trust assets are included in the surviving spouse’s New York estate at the second death, even if no federal QTIP election was ever made.⁴ Families who deferred tax at the first death using a QTIP election need to plan for that inclusion later.

No Portability Between Spouses

Federal law lets a surviving spouse inherit the deceased spouse’s unused exemption. New York does not.⁴ Each spouse gets one $7,350,000 exclusion, and anything left unused at the first death is gone.

That rule interacts dangerously with the cliff. A couple with a combined estate of $12 million sits well below the federal threshold and may assume no planning is needed. If the first spouse leaves everything outright to the survivor using the marital deduction, nothing is owed at that point. But when the surviving spouse later dies holding the full $12 million with only one exclusion to apply, the estate blows past the $7,717,500 cliff and is taxed on the entire amount. Using a trust at the first death to capture both exclusions remains one of the most effective strategies for New York families.

Tax Rates

Rates are progressive, starting at 3.06% and reaching 16% at the top.² Selected brackets:

Up to $500,000: 3.06%
$500,001 to $1,000,000: $15,300 plus 5.0% of the amount over $500,000
$1,000,001 to $1,500,000: $40,300 plus 5.5% of the amount over $1,000,000
$2,100,001 to $2,600,000: $106,800 plus 8.0% of the amount over $2,100,000
$3,600,001 to $4,100,000: $238,800 plus 10.4% of the amount over $3,600,000
$5,100,001 to $6,100,000: $402,800 plus 12.0% of the amount over $5,100,000
$7,100,001 to $8,100,000: $650,800 plus 13.6% of the amount over $7,100,000
$9,100,001 to $10,100,000: $930,800 plus 15.2% of the amount over $9,100,000
Over $10,100,000: $1,082,800 plus 16.0% of the amount over $10,100,000

These brackets apply to the taxable estate after deductions. If the estate is at or below the exclusion, the credit zeroes out the tax. Above the cliff, the full rate table applies to the entire taxable estate. An $8 million estate that loses the exclusion owes roughly $773,200 to New York alone.

How It Compares to the Federal Estate Tax

The federal exemption for 2026 is $15,000,000 per individual.⁵ Many estates will therefore owe New York tax while owing nothing to the IRS. A $10 million estate sits well below the federal line but deep into New York’s top brackets.

Even when no federal tax is due, New York requires executors to prepare and submit a completed federal Form 706 along with the state return.¹ The federal form supplies the asset inventory and valuations New York uses to compute its own tax.

Filing the Return and Paying the Tax

Executors have nine months from the date of death to file Form ET-706 and pay the full tax.⁶ The return must include date-of-death valuations for every asset, backed by appraisals or financial statements, and the completed federal Form 706 must accompany it.⁷

A filing requirement is triggered whenever the federal gross estate plus includible gifts exceeds $7,350,000.⁸ For nonresidents, the gross estate must also include New York real or tangible property. Estates that ultimately owe nothing because of deductions still have to file if the gross estate crosses the threshold.

Extensions

Form ET-133 grants an automatic extension of time to file.⁹ It does not extend the time to pay. The estimated tax is still due within the original nine-month window, and the executor must remit payment with the extension application. An extension of time to pay requires a separate showing of undue hardship with documentation explaining why estate assets cannot be converted to cover the tax by the deadline.

Late Penalties

Missing the nine-month deadline triggers a late filing penalty of 5% of the unpaid tax per month, capped at 25%, plus interest that accrues on top. For a six-figure bill, a few months of delay can add tens of thousands of dollars. Executors who foresee any trouble meeting the deadline should file Form ET-133 before the nine months run out rather than let penalties start running.

1
New York State Department of Taxation and Finance. Estate Tax
2
New York State Senate. New York Tax Law 952 – Tax Imposed
3
New York State Senate. New York Tax Law 954 – Resident’s New York Gross Estate
4
New York State Department of Taxation and Finance. Instructions for Form ET-706 New York State Estate Tax Return
5
Internal Revenue Service. Estate Tax
6
New York State Senate. New York Tax Law 972 – Time and Place for Filing Returns
7
New York State Department of Taxation and Finance. New York State Estate Tax Return ET-706
8
New York State Senate. New York Tax Law 971 – Estate Tax Returns
9
New York State Department of Taxation and Finance. Form ET-133 Application for Extension of Time to File and/or Pay