Last updated: May 29, 2026 | By Inna Fershteyn, Esq. | Reading time: ~9 minutes
The New York estate tax exemption for 2026 is $7,350,000 per individual — the amount a person can pass to his beneficiaries before any New York State estate tax is owed. But New York has two features that make its estate tax unusually harsh: the estate tax “cliff,” which can tax the entire estate (not just the excess) once an estate exceeds 105% of the exemption, and the absence of spousal portability, which means a married couple can lose one spouse’s entire exemption without proper planning. This article explains the 2026 exemption, how the cliff works, why portability matters, and the strategies families use to protect their assets.
Key facts at a glance (2026)
- New York estate tax exemption: $7,350,000 per individual (up $190,000 from 2025).
- Estate tax cliff: at 105% of the exemption ($7,717,500), the entire exemption is eliminated and the whole estate is taxed from the first dollar.
- New York estate tax rates: 3.06% to 16% (NY Tax Law § 952).
- No spousal portability: unused exemption is lost at death and cannot transfer to a surviving spouse.
- Federal exemption 2026: $15,000,000 per individual — far higher than New York’s.
- Filing deadline: New York State estate tax return is due within 9 months of death.
What Is New York’s Estate Tax Exemption for 2026?
For deaths occurring between January 1, 2026, and December 31, 2026, the New York estate tax exclusion amount is $7,350,000. This is an increase of $190,000 from the 2025 calendar year.
Estates exceeding the $7,350,000 exclusion amount must file a New York State estate tax return. This applies to:
- New York State residents with estates that exceed the $7,350,000 exemption.
- Non-residents who own tangible property in New York and whose federal gross estate and includible gifts surpass the exclusion amount.
How New York’s Exemption Compares to the Federal Exemption
| 2026 estate tax exemption | Amount per individual |
|---|---|
| New York State exemption | $7,350,000 |
| Federal exemption | $15,000,000 |
| Difference | $7,650,000 |
A New York family can therefore owe substantial New York estate tax while owing nothing at the federal level. This gap is the central reason estate tax planning matters in New York even for families well below the federal threshold.
When Gifts Are Added Back to the Estate
Under § 2503 of the Internal Revenue Code, taxable gifts need to be added to the value of the estate to determine if the estate exceeds the exclusion amount. These taxable gifts include:
- Gifts made within a 3-year period of the decedent’s (the person who has passed away) death.
- Gifts not already included in the decedent’s federal gross estate.
There are certain exceptions. Estates do not need to add a gift to the estate if the gift:
- was made while the decedent was a nonresident;
- was made before April 1, 2014;
- was made between January 1, 2019, and January 15, 2019;
- is real or tangible property located outside of New York State at the time the gift was made.
What Is the New York Estate Tax Cliff?
The New York estate tax cliff is a unique feature of the New York estate tax system that can cause an enormous jump in taxes once an estate exceeds the basic exclusion amount. The rule works in three tiers:
| Estate value (2026) | What is taxed |
|---|---|
| At or below $7,350,000 | No New York estate tax is due. |
| Above $7,350,000 but at or below $7,717,500 (105%) | Only the portion exceeding the exemption is taxed. |
| Above $7,717,500 (more than 105%) | The exemption is eliminated entirely; the whole estate is taxed from the first dollar. |
This is different from the federal estate tax and from most other states, where tax typically applies only to the portion of the estate that exceeds the exclusion amount. Under § 952 of the New York Tax Law, estate tax rates range from 3.06% to 16%. Once the cliff is triggered, those rates apply to the entire estate rather than just the excess, so the additional tax can be significant.
New York vs. Connecticut: the Same Estate, a Very Different Result
Consider an estate worth $17,000,000 in 2026:
| State | 2026 exemption | Amount subject to estate tax |
|---|---|---|
| Connecticut | $15,000,000 | $2,000,000 (only the excess) |
| New York | $7,350,000 | The entire $17,000,000 (cliff triggered) |
In Connecticut, only the $2,000,000 above the exemption is taxed. In New York, because the estate exceeds 105% of the exemption, the entire $17,000,000 is subject to estate tax from the first dollar.
How Can I Avoid New York’s Estate Tax Cliff?
To avoid the cliff, start by determining the value of your estate and whether it exceeds, or is close to exceeding, 105% of the New York exemption. If it does, an experienced estate planning attorney can help protect your family’s assets and minimize or even avoid the tax. Two strategies are especially common.
Strategy 1: Lifetime Gifting
By transferring assets during your lifetime, you reduce the overall value of your taxable estate. The federal annual gift tax exclusion is currently $19,000 per recipient per year, meaning you can give $19,000 to each child or grandchild in a calendar year without incurring a gift tax. Because gifts made within 3 years of death are added back into the estate, lifetime gifting is most effective when done well in advance and while in good health.
Strategy 2: The “Santa Clause” Charitable Provision
A “Santa Clause” is a provision in a trust or will that directs assets exceeding the exemption to a charitable organization. Because charitable gifts are fully deductible for estate tax purposes, this can keep the estate from crossing the cliff threshold. It is especially effective when an estate only slightly exceeds 105% of the exemption: the donation lowers the taxable estate back under the threshold, which can mean more assets ultimately pass to the family (because no cliff tax is triggered) while also supporting a cause the grantor cares about.
For families considering trusts as part of this planning, our 2026 guide to revocable vs. irrevocable trusts in New York explains how different trust structures affect the taxable estate.
What Does Spousal Portability Look Like in New York?
Unlike the federal estate tax system, New York does not allow spousal portability — the ability of a surviving spouse to use the unused portion of a deceased spouse’s exemption. In New York, each individual is limited to his own estate tax exemption of $7,350,000 in 2026, and any unused part is lost at death. Because the exemption cannot be transferred, planning is especially important for married couples.
Credit Shelter Trusts (Bypass Trusts)
For couples whose combined estate exceeds the exemption, a credit shelter trust (also called a bypass trust) is the most common tool to make sure both spouses’ exemptions are fully used. After the first spouse’s death, an amount up to the New York exemption is transferred into the credit shelter trust rather than directly to the surviving spouse. The trust can still support the surviving spouse’s living expenses.
Because those assets are held in the trust and not owned by the surviving spouse, they are generally not included in the surviving spouse’s taxable estate. As a result, the first spouse’s exemption is preserved, and the surviving spouse keeps his own full exemption at death. This approach lets married couples pass more to their children and other beneficiaries while minimizing or avoiding New York estate tax. Given the complexity, married couples in New York should consider consulting an experienced estate planning attorney to build a plan tailored to their goals.
Frequently Asked Questions
When must the New York estate tax return be filed and the tax paid?
Estates should file the New York State Estate Tax Return and the United States Estate Tax Return with the tax department and pay the tax within 9 months of the decedent’s death. Failure to do so may result in late penalties and interest.
Can I get an extension to file the return or pay the tax in New York?
Yes. You can request an extension by filing Form ET-133, the Application for Extension of Time to File and/or Pay Estate Tax. The extension granted generally does not exceed 6 months, though a longer extension may be available in cases of hardship. If you do not expect to file or pay on time, filing for an extension is important, because late filing or payment results in penalties and possibly interest.
What is the estate tax closing letter and what role does it play?
The estate tax closing letter is an official document issued after all processing is complete. It certifies that no tax is due or serves as a final receipt of the tax paid. It is important to keep this document for your records.
Is New York’s estate tax exemption different from the federal exemption, and does it change each year?
Yes. New York’s exemption is different from the federal exemption. In 2026, the New York exemption is $7,350,000, while the federal exemption is $15,000,000. The New York exemption changes from year to year because it is indexed for inflation.
Can I change something on an estate tax return after filing it?
Yes. To amend a return, file a new Form 706 or Form 706-NA and write “Supplemental Information” across the top of the first page. Include a statement explaining what changed along with any supporting information, and attach a copy of the first four pages of the Form 706 or Form 706-NA you already filed.
What other information might I need to provide with the estate tax return?
You may also need to provide a copy of the decedent’s death certificate, copies of the will and any relevant trusts, letters of appointment for administrators, copies of appraisals, and copies of documents relating to any litigation involving the estate.
Talk to a New York Estate Planning Attorney
The estate tax cliff is avoidable — with planning done in advance.
The Law Office of Inna Fershteyn and Associates, P.C. has been helping New York families plan around the estate tax cliff, preserve both spouses’ exemptions, and protect their assets since 1998. The firm serves clients across Brooklyn, Manhattan, Queens, Long Island, Westchester, and New Jersey, and works with English-speaking, Russian-speaking, and Ukrainian-speaking families.
Call: (718) 333-2395 • Office: 1517 Voorhies Avenue, 4th Floor, Brooklyn, NY 11235
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