On the heels of changes made in Maryland and New York, Rhode Island is the latest state to tweak its state estate tax laws. Currently Rhode Island has the second lowest state estate tax exemption, an odd $921,655 due to the exemption increasing from $675,000 to $850,000 in 2010 and then being indexed for inflation thereafter. Currently New Jersey has the lowest state estate tax exemption, a whopping $675,000, while the exemptions in the other handful of states that still collect a state estate tax range from $1,000,000 to $5,340,000.
Now, a mere four years later, Rhode Island lawmakers are at it again. This time they decided to increase the estate tax exemption from $921,655 to $1,500,000 for deaths occurring on or after January 1, 2015. The exemption will then be indexed for inflation in 2016 and future years based on the Consumer Price Index for all Urban Consumers (CPI-U). Lawmakers also eliminated the so-called “cliff tax” which resulted in an estate being taxed on its full value once it exceeded the value of the estate tax exemption. Starting in 2015, an estate will only be taxed on the amount by which exceeds the exemption. The estate tax rate was not changed.
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- Overview of Rhode Island Estate Tax Laws
- 2014 State Death Tax Exemption and Top Tax Rate Chart
- Understanding the State Estate Tax Exemption Trap
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