Washington imposes nation’s highest estate tax rate; most states no longer have estate or inheritance taxes

The Tax Foundation reports Washington remains an estate tax outlier: imposing the nation’s highest tax rate and one of only a handful of states still levying the tax.

Tax Foundation analyst Morgan Scarboro writes,

In addition to the federal estate tax of 40 percent, some states impose an additional estate or inheritance tax. Twelve states and the District of Columbia impose an estate tax while six states have an inheritance tax. Maryland is the only state in the country to impose both.

Washington state’s 20 percent rate is the highest estate tax rate in the nation; eight states and DC are next with a top rate of 16 percent. Three states match the federal exemption level of $11.2 million.

Of the six states with inheritance taxes, Nebraska has the highest top rate at 18 percent. Maryland imposes the lowest top rate at 10 percent. All six states exempt spouses, and some fully or partially exempt immediate relatives.

Last fall, we wrote of a Stateline article finding that most states were choosing to eliminate the estate tax.

In 2001, every U.S. state imposed either an estate or inheritance tax. But that year, the federal government eliminated its income tax credit for such payments — and the repeals began. By 2018, only 17 states will have an estate tax, an inheritance tax or both.

In recent years, Tennessee (2016), Georgia (2014), Indiana, North Carolina and Ohio (all in 2013) also have eliminated their estate or inheritance taxes.

Earlier this year, Minnesota increased its estate tax exemption from $1.8 million to $2.1 million, retroactive to Jan.1. The exemption increases to $2.4 million in 2018, $2.7 million in 2019, and $3 million in 2020.

Washington lawmakers passed an estate tax in 2005. Initiative 920, a 2006 attempt to repeal the legislation, was rejected 38-62