New York State does not have an inheritance tax
New York does not charge an inheritance tax — a tax on money or property you receive from someone who has died. You will not owe New York State income tax on an inheritance, and New York does not file a separate inheritance tax return.
This is different from an estate tax, which New York does have. An estate tax is paid by the estate itself (the total value of everything the deceased person owned) before money is distributed to heirs. If you inherit money or property, you typically do not pay tax on it personally, but the estate may owe tax before your inheritance reaches you.
The federal government also has an estate tax, but it only applies to very large estates. Most people in New York will not deal with either tax.
Key Takeaways
- New York State has no inheritance tax, so you do not owe state tax on money or property you inherit.
- New York does have an estate tax that applies to estates worth more than $6.94 million (as of 2024), but this is paid by the estate, not by individual heirs.
- The federal estate tax applies only to estates larger than $13.61 million (as of 2024), and most New York residents will not encounter it.
- Inherited retirement accounts like IRAs and 401(k)s have their own rules about taxes and required withdrawals, separate from inheritance and estate taxes.
How New York's estate tax works
New York's estate tax applies to the total value of everything a person owned when they died — their house, bank accounts, investments, vehicles, and other property. The estate tax is calculated and paid by the estate's executor or administrator before money is distributed to heirs.
The tax only applies if the estate is worth more than a certain amount. That threshold changes each year. In 2024, New York's estate tax applies only to estates worth more than $6.94 million. If an estate is smaller than that, no New York estate tax is owed.
The estate tax rate in New York ranges from 3.06% to 16%, depending on how much the estate is worth. The larger the estate, the higher the percentage. An executor or estate attorney can calculate whether tax is owed and file the necessary forms with the New York Department of Taxation and Finance.
The difference between inheritance tax and estate tax
An inheritance tax is paid by the person who receives the money or property — you pay tax on what you inherit. An estate tax is paid by the estate itself before distribution. New York has one but not the other.
Some states have both. Some have only an inheritance tax. Some have neither. New York is in the group that has only an estate tax, and only for large estates.
Because New York has no inheritance tax, you do not report your inheritance on your New York State income tax return, and you do not owe state tax on it. The estate may owe tax, but that is handled separately by whoever is managing the estate.
Federal estate tax and how it differs from New York's
The federal government also taxes large estates, but the threshold is much higher than New York's. In 2024, the federal estate tax applies only to estates worth more than $13.61 million. Very few New York residents will owe federal estate tax.
The federal estate tax rate is flat at 40% for estates that exceed the threshold. This is much higher than New York's rate, but it applies to far fewer estates because the threshold is so high.
The federal threshold is set to drop significantly after 2025 unless Congress changes the law. Starting in 2026, the threshold is scheduled to fall to around $7 million per person (adjusted for inflation). This could affect more estates in the future, but that change is not yet in effect.
What happens to inherited retirement accounts
Inherited IRAs, 401(k)s, and other retirement accounts are treated differently from other inherited property. You do not owe inheritance or estate tax on them, but you do owe income tax when you withdraw the money.
The rules for inherited retirement accounts changed in 2020 under federal law. In most cases, you must withdraw all the money within 10 years of the account owner's death. The withdrawals are taxed as ordinary income at your tax rate, not at a special inheritance tax rate.
Spouses who inherit retirement accounts have different options than other heirs — they can sometimes treat the account as their own or roll it into their own IRA. Talk to a tax professional or the financial institution holding the account to understand your specific situation.
When to talk to an estate attorney or tax professional
If the person who died had a large estate — more than $6.94 million in New York or $13.61 million federally — the executor or administrator should work with a tax professional to calculate and file estate tax returns. This is not something to handle alone.
If you are inheriting property, a business, or significant assets, it is worth having a conversation with a tax professional about how the inheritance affects your personal taxes. In most cases, the answer is that it does not, but there are exceptions depending on what you inherit and how.
An estate attorney can also help clarify what documents you need, what the executor's responsibilities are, and whether any taxes are owed. Many attorneys offer a free initial consultation.
Frequently Asked Questions
Do I have to report my inheritance on my New York State tax return?
No. New York has no inheritance tax, so you do not report inherited money or property on your state income tax return. The estate may owe tax, but that is handled by the person managing the estate, not by you.
What if the person who died lived in another state?
If the deceased person lived in another state, that state's laws explore to their estate. Some states have inheritance taxes that do explore to heirs. You should check the laws of the state where the person lived or owned property. New York's lack of an inheritance tax does not protect you from another state's tax.
Is there a time limit for paying estate tax in New York?
Yes. The estate tax return must be filed with the New York Department of Taxation and Finance within nine months of the person's death, unless an extension is granted. The tax is usually due at the same time. An executor or tax professional can file for an extension if needed.
Do I owe tax on life insurance money I inherit?
No. Life insurance proceeds paid to a named beneficiary are not subject to income tax, inheritance tax, or New York estate tax. However, if the insurance payout is very large, it may be included in the estate's total value for federal estate tax purposes if the threshold is exceeded.
What if I inherit property in another state?
Property located in another state may be subject to that state's taxes, even if you live in New York. Real estate, for example, is taxed by the state where it is located. You should research the tax laws of the state where the property is located or consult a tax professional.