New York Estate Tax 2026: Exemption and the Cliff

The New York estate tax exempts estates up to about $7.35 million for 2026, but a quirk called the cliff can erase that whole exemption once an estate tops it by more than 5 percent.1 Land past that point and the entire taxable estate is taxed, not just the excess. This guide explains the exemption, the cliff, and who pays.

The cliff is the part most guides gloss over, so read that section carefully if your estate is anywhere near the threshold.

In This Guide

• New York Estate Tax at a Glance
• How the New York Estate Tax Works
• The Cliff, Explained
• Who Must File, and When
• Estate Tax Is Not Inheritance Tax
• Not the Federal Tax, Not Medicaid Recovery
• Frequently Asked Questions
• Next Steps

New York Estate Tax at a Glance

Here is the full picture in one table. New York runs a graduated estate tax, imposed on the transfer of the estate and paid by the estate before assets pass to heirs. The figures below come from the New York State Department of Taxation and Finance.1

How the New York Estate Tax Works

The estate tax is a tax on the value of everything a person owned at death, paid by the estate itself, not by the heirs. The executor files the return and pays the bill out of estate assets before the remainder is distributed.

New York's exemption is called the Basic Exclusion Amount (BEA), and unlike some states it is indexed for inflation, so it rises each year. It is $7,160,000 for deaths in 2025 and $7,350,000 for deaths in 2026.1 An estate below the BEA owes no New York estate tax. The top rate is 16 percent.1

What counts toward the estate is broader than people expect. The taxable estate generally includes the home and any other real estate, bank and brokerage accounts, retirement accounts like IRAs and 401(k)s, the death benefit of life insurance the deceased owned, business interests, vehicles, and personal property. It is the gross value of what the person owned or controlled at death. In high-cost parts of New York, a long-held home and a substantial retirement account can add up faster than people assume, which matters a great deal here because of where the second threshold sits.

So far this looks like every other state's estate tax: a high exemption, a graduated rate, the estate pays. The catch is what happens just above the exemption, and it is unusual enough that it gets its own section.

New York does not offer portability. The exemption is not portable between spouses, so a surviving spouse cannot add a deceased spouse's unused BEA to their own.1 For couples with combined estates near the threshold, that gap is a core reason to do trust planning, and it is worth raising with an estate attorney well before either spouse dies.

The Cliff, Explained

This is the feature that makes New York different, and it can cost a family a fortune if they ignore it.

You might expect only the amount above the exemption to be taxed. New York does not work that way. It computes the tax on the entire taxable estate and then subtracts a credit: at or below the BEA the credit equals the whole tax, so nothing is owed. If the estate is over the BEA by no more than 5 percent, the credit is proportionately reduced. And once the taxable estate exceeds 105 percent of the BEA, no credit is allowed at all, so the whole taxable estate is taxed at the scheduled rates, not just the part over the line.1 That is the cliff.

Here is what it looks like in 2026 numbers. The BEA is $7,350,000, so 105 percent of it, the cliff point, is about $7,717,500.1 An estate at $7,350,000 owes nothing. An estate above $7,717,500 gets no credit and is taxed on its entire value. The roughly $367,500 band between those two figures is the danger zone, where a small increase in estate value can trigger a tax measured in the hundreds of thousands of dollars.

The practical lesson: if an estate is hovering in that zone just above the exemption, the planning is worth real money. Charitable gifts, lifetime gifting, and trust structures are common tools used to keep an estate below the cliff or soften its impact. This is general information, not legal or tax advice, and an estate near the cliff is exactly the situation that warrants a New York estate attorney.

Who Must File, and When

Two things surprise families here, and both can cost money.

The nine-month clock starts at the date of death. Form ET-706 must be filed within nine months after the date of death, unless an extension of time to file the return has been granted.1 That is a short window when a family is also selling a house, tracking down account statements, and grieving. Put the date on a calendar the week the executor is appointed, and ask the estate attorney about an extension early rather than in month eight.

Gifts made in the last three years get added back. The estate of a New York resident must file if the federal gross estate plus any includible gifts exceeds the Basic Exclusion Amount, and includible gifts are taxable gifts made during the three-year period ending on the date of death that are not already in the federal gross estate.1 So a parent who gave away $500,000 two years before dying does not thereby drop $500,000 below the exclusion. Two kinds of gift are not added back: a gift made while the parent was a nonresident, and a gift of real or tangible property located outside New York when it was given.1 That add-back is exactly what can push an estate over the cliff described above, which is why late gifting is a poor substitute for planning done years in advance.

A nonresident's estate must file too, if the estate includes real or tangible property located in New York State and the federal gross estate plus includible gifts exceeds the Basic Exclusion Amount.1 A Florida retiree who kept the family cottage upstate is in scope.

Estate Tax Is Not Inheritance Tax

These two terms get used interchangeably, but they are not the same, and the difference decides who pays.

An estate tax is paid by the estate, out of the deceased person's assets, before anything is distributed. An inheritance tax is paid by the heirs, on what each receives, after distribution. A few states levy one.

New York's death tax is the first kind. Tax Law section 952(a) imposes the tax "on the transfer of the New York estate by every deceased individual who at his or her death was a resident of New York state," and the estate reports and pays it on Form ET-706 before assets pass on.1 The bill lands on the estate, not on each beneficiary's share, so what reaches you as an heir is what is left after the estate has settled with New York, rather than something New York then bills you for separately. If anyone tells you that you personally owe New York a tax on an inheritance you received, take that to a New York estate attorney or the Department of Taxation and Finance before you pay it.

For heirs, that means the estate tax can shrink what is left to divide, but it does not put a separate bill in each beneficiary's hands.

Not the Federal Tax, Not Medicaid Recovery

Two other things get confused with New York's estate tax. Both are different, and the distinction matters.

The federal estate tax is separate. The federal basic exclusion amount is $15 million per decedent for deaths in 2026, roughly double New York's exclusion. Lifetime taxable gifts count against it, and a surviving spouse can use a deceased spouse's unused federal exclusion only if the executor elects it on a timely filed Form 706.2 New York's exclusion is not portable at all.1 An estate can owe New York while owing nothing to the IRS. The two are filed on separate returns: Form ET-706 for New York and federal Form 706.1 Clearing the federal bar tells you nothing about whether you owe New York.

Medicaid estate recovery is not a tax at all. It is the process by which a state seeks repayment from the estate of someone who received certain Medicaid-funded long-term care. It applies to a different group of people, for a different reason, under separate rules. If a parent received Medicaid-paid nursing home care, the relevant concern is recovery, not the estate tax. We cover it fully in Medicaid estate recovery; the similar name does not make them one issue.

Learn More

These guides go deeper on planning, the home as an asset, and the separate question of Medicaid recovery:

Next Steps

Figure out where the estate falls relative to the Basic Exclusion Amount, and pay special attention if it sits in the band just above it. The cliff makes that zone expensive, and a New York estate attorney can show you the tools used to stay under it.

Find personalized help planning for senior care costs at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.