Update: Iowa repeals its inheritance tax.
“As states address budget woes due to the pandemic, one place they may turn to for revenue as they have in past economic crises is death taxes. Already the District of Columbia has toughened its estate tax levy, effective January 1, 2021. In August, Mayor Muriel Bowser signed the “Estate Tax Adjustment Act” reducing the exemption from $5.67 million in 2020 to $4 million for individuals who die on or after January 1, 2021. A resident dying in 2021 with a taxable estate of $10 million would owe nearly $1 million in estate tax to D.C.
Seventeen states and D.C. impose their own estate or inheritance taxes separate from the federal estate tax levy, which hits far fewer people today. For 2021, the federal estate tax exemption is $11.7 million per person. It’s set to drop back to $5 million per person with inflation adjustments in 2026. But President-elect Joseph Biden has called for the federal estate tax to revert back to its 2009 level: $3.5 million per person. That change could come to help pay for fighting the pandemic and the infrastructure build out he’s promised. ”