New York Estate Tax Return: Deadlines, the 5% Cliff, and Filing

If you are settling the estate of someone who died as a New York resident in 2026, you must file a New York estate tax return on Form ET-706 when the decedent’s federal gross estate, plus certain gifts made within three years of death, exceeds $7,350,000.¹ The return and any tax owed are both due nine months after the date of death, and they go to the New York State Department of Taxation and Finance separately from anything owed to the IRS. Rates run from 3.06% to 16%, and a quirk in the law called the “cliff” can turn a small overage into a very large tax bill.

Who Has to File

The executor files Form ET-706 whenever the decedent’s federal gross estate, increased by certain includible gifts, is larger than the basic exclusion amount in effect on the date of death.² For deaths in 2026, that threshold is $7,350,000.¹ The figure adjusts periodically for inflation, so a death in a different year uses a different number.

The federal gross estate is broader than most families realize. It covers bank and investment accounts, but also the full value of life insurance payable to the estate, retirement accounts, jointly held property, and revocable trusts. An estate that looks modest on paper can clear $7,350,000 once every asset is counted. And even when no federal return is owed to the IRS, you still have to prepare a complete federal Form 706 and submit it with the New York return.³

Three-Year Gift Add-Back

New York adds back certain taxable gifts the decedent made within three years before death. Without this rule, someone near the threshold could give assets away shortly before dying and escape the filing requirement.¹ The add-back captures gifts reported under IRC § 2503 during that three-year window that are not already in the federal gross estate. These gifts count toward the filing threshold, and if you file, include copies of any federal Form 709 on which the gifts were reported.³

Watch the 5% Cliff

This is the single most important feature of the New York estate tax. If the taxable estate stays at or below $7,350,000, a credit erases the tax entirely and nothing is owed. Once the estate exceeds 105% of the exclusion — $7,717,500 for 2026 — the credit disappears completely and tax applies from the first dollar of the estate.⁴ Between those two figures, the credit phases out.

The math is harsh. An estate worth $7,350,000 owes zero. An estate worth $7,720,000 could owe roughly $700,000 or more. A modest bump in value can generate a tax bill larger than the amount by which the estate crossed the line. Practitioners call this the cliff because the effective marginal rate in that narrow band can exceed 100%.

Precision in valuation matters enormously when an estate is anywhere near the threshold. A real estate appraisal that comes in higher than expected, or a forgotten retirement account, can be the difference between owing nothing and owing hundreds of thousands. Treat the 105% figure as the real danger zone, not the exclusion amount itself.

The Nine-Month Deadline

Form ET-706 and full payment of any tax owed are both due within nine months of the date of death.⁵ Certified mail with a return receipt gives you proof of timely filing if a dispute comes up later. Make sure enough estate cash is available to cover the tax within that window; the obligation does not wait for property sales or the close of probate.

Extensions

If you need more time, file Form ET-133, Application for Extension of Time to File and/or Pay Estate Tax. A filing extension generally cannot exceed six months beyond the original due date unless the executor is out of the country. An extension to pay cannot exceed 12 months from the due date, except in cases of undue hardship, where the state can grant up to four years.⁶

Getting more time to file does not get you more time to pay. Interest still runs on any unpaid tax from the original nine-month due date, even during an approved extension.¹

Penalties and Interest

Late filing and late payment carry separate penalties, and both can apply at once. Interest accrues on any unpaid balance from the original due date. Rates change quarterly; for early 2025 the rate on late estate tax payments was 9.5% annually.⁷ Check the Department of Taxation and Finance website for the rate in effect when you actually pay.

What Goes on the Return

Form ET-706 is available from the Department of Taxation and Finance website.⁸ The form breaks assets into schedules by type (real estate, stocks and bonds, bank accounts, insurance, jointly held property, and so on) and asks for specific identifiers like account numbers, property addresses, and CUSIP numbers.

Attach the following documents:³

A completed federal Form 706 with all schedules and supporting documents, even if the IRS does not require one
A copy of the decedent’s death certificate
A copy of the last will, if one exists
Letters of appointment from the surrogate’s court, if obtained
Copies of any federal Form 709 for includible taxable gifts
Form ET-14 power of attorney if someone other than the executor handles the filing

Valuation

Assets in the New York gross estate are valued as of the date of death.⁹ If the estate files a federal return and elects alternate valuation under IRC § 2032, New York follows that election. Even when no federal return is required, the executor can elect alternate valuation for New York purposes if the estate would have qualified federally.

Real estate typically requires a formal appraisal from a licensed appraiser. Financial accounts use closing balances or share prices on the date of death. Closely held businesses and unusual assets usually need professional valuation work. Inaccurate valuations are one of the most common triggers for a state audit, especially on real property in high-value areas.

Resident Gross Estate

A New York resident’s gross estate starts with the federal gross estate and removes any real or tangible property physically located outside New York.⁹ Intangibles like stocks, bonds, and bank accounts stay in regardless of where the financial institution sits.

No Portability Between Spouses

Under federal law, a surviving spouse can elect to use the deceased spouse’s unused exemption, effectively doubling the couple’s shield. New York offers nothing like this. There is no portability of the state basic exclusion amount between spouses.

The gap matters for married couples whose combined assets top the exclusion. Leaving everything outright to a surviving spouse eliminates tax on the first death through the marital deduction, but when the second spouse dies with the combined assets, the estate gets only one exclusion, not two. Proper trust planning while both spouses are alive is often the difference between owing nothing and owing hundreds of thousands.

Tax Rate Brackets

When tax is owed, New York applies graduated rates to the full New York taxable estate:⁴

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
$1,500,001 to $2,100,000: $67,800 plus 6.5% of the amount over $1,500,000
$2,100,001 to $2,600,000: $106,800 plus 8.0% of the amount over $2,100,000
$2,600,001 to $3,100,000: $146,800 plus 8.8% of the amount over $2,600,000
$3,100,001 to $3,600,000: $190,800 plus 9.6% of the amount over $3,100,000
$3,600,001 to $4,100,000: $238,800 plus 10.4% of the amount over $3,600,000
$4,100,001 to $5,100,000: $290,800 plus 11.2% of the amount over $4,100,000
$5,100,001 to $6,100,000: $402,800 plus 12.0% of the amount over $5,100,000
$6,100,001 to $7,100,000: $522,800 plus 12.8% of the amount over $6,100,000
$7,100,001 to $8,100,000: $650,800 plus 13.6% of the amount over $7,100,000
$8,100,001 to $9,100,000: $786,800 plus 14.4% of the amount over $8,100,000
$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

Rates apply after deductions. Estates at or below the exclusion see the credit erase the tax entirely. Estates above 105% get the full table with no credit.

Non-Resident Filings

If the decedent was not a New York resident but owned real property or tangible personal property physically located in the state, the estate may still owe New York tax. Two conditions must both be met: the estate includes real or tangible property with an actual New York location, and the federal gross estate (plus includible gifts of New York property) exceeds the basic exclusion amount.²

For non-residents, only certain property counts toward the New York taxable estate: real property in New York, tangible personal property physically in the state, and intangible personal property used in a business carried on in New York. Stocks, bonds, and bank accounts held by a non-resident are not included, even if the institution is in New York.¹⁰ Non-resident estates use the same Form ET-706 and must also attach Form ET-141, the New York State Estate Tax Domicile Affidavit.³

Releasing the Lien on Real Property

A lien attaches automatically to any real property in the decedent’s estate on the date of death to secure the estate tax.¹¹ You cannot sell or transfer the property until the Tax Department issues a release. To get the release, file Form ET-117, Release of Lien of Estate Tax, for each county where real property sits.³ The department issues the release after processing the return and confirming that any tax is paid or that none is due.

When the estate needs to sell real property to raise the tax payment itself, the timing creates a genuine problem. The department handles early lien release requests case by case.

1
Department of Taxation and Finance. Estate Tax
2
New York State Senate. New York Tax Law 971 – Estate Tax Returns
3
New York State Department of Taxation and Finance. Instructions for Form ET-706 New York State Estate Tax Return
4
New York State Senate. New York Tax Law 952 – Tax Imposed
5
New York State Senate. New York Tax Law 972 – Time and Place for Filing Returns
6
New York State Department of Taxation and Finance. Instructions for Form ET-133 Application for Extension of Time to File and/or Pay Estate Tax
7
Department of Taxation and Finance. Interest Rates 1/01/2025 – 3/31/2025
8
New York State Department of Taxation and Finance. Estate Tax Forms – Current Period
9
New York State Senate. New York Tax Law 954 – Residents New York Gross Estate
10
New York State Senate. New York Tax Law 960 – Nonresidents Estate Tax
11
Department of Taxation and Finance. Release of Estate Tax Lien