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State Death Tax Credit Table

The State Death Tax Credit Table below is used to determine the amount of state death taxes assessed against an estate that can be used as a credit against the federal estate taxes assessed against the same estate. One dollar of credit reduces the federal estate tax by one dollar.

2001

Adjusted Taxable Estate*

Credit

+ %

Of Excess Over

$0 - $40,000

$0

0

$0

40,000 - 90,000

0

0.8

40,000

90,000 - 140,000

400

1.6

90,000

140,000 - 240,000

1,200

2.4

140,000

240,000 - 440,000

3,600

3.2

240,000

440,000 - 640,000

10,000

4.0

440,000

640,000 - 840,000

18,000

4.8

640,000

840,000 - 1,040,000

27,600

5.6

840,000

1,040,000 - 1,540,000

38,800

6.4

1,040,000

1,540,000 - 2,040,000

70,800

7.2

1,540,000

2,040,000 - 2,540,000

106,800

8.0

2,040,000

2,540,000 - 3,040,000

146,800

8.8

2,540,000

3,040,000 - 3,540,000

190,800

9.6

3,040,000

3,540,000 - 4,040,000

238,800

10.4

3,540,000

4,040,000 - 5,040,000

290,800

11.2

4,040,000

5,040,000 - 6,040,000

402,800

12.0

5,040,000

6,040,000 - 7,040,000

522,800

12.8

6,040,000

7,040,000 - 8,040,000

650,800

13.6

7,040,000

8,040,000 - 9,040,000

786,800

14.4

8,040,000

9,040,000 - 10,040,000

930,800

15.2

9,040,000

10,040,000+

1,082,800

16.0

10,040,000

Source: CCH 1999 U.S. Master Tax Guide.

* The adjusted taxable estate is the taxable estate reduced by $60,000

Transformation of State Death Tax Credit into a State Death Tax Deduction under the 2001 Tax Act

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) provides for the step-wise reduction of the State Death Tax Credit from 2002 – 2004, followed by repeal of the credit in 2005. In its place, the Act allows for a deduction of state death taxes paid against the taxable estate for federal estate tax purposes.

In 2002, the state death tax credit computed using the 2001 table above was reduced 25%. It was reduced 50% in 2003 and 75% in 2004. It was eliminated entirely in 2005 and beyond.

If the tentative state death tax credit using the table above was computed to be $200,000 in 2003, for example, the credit allowed was $200,000 x 50% = $100,000.

Starting in 2005, a deduction against federal estate tax equal to the amount of state death tax actually paid became available in place of the state death tax credit.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the state death tax deduction in place of a state death tax credit for 2011 – 2012 and the American Taxpayer Relief Act of 2012 made the deduction in place of the credit permanent.

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