Are State Estate Taxes Deductible on the Beneficiaries’ Income Tax Returns?

 In Estate and Gift Taxes


When my children will need to pay a Massachusetts estate tax after my death, will that deductible come from their federal income taxes? I read somewhere that it will.

Massachusetts-estate-tax-planning-Wellesley, MA-02481

Photo by Wellesley Yan on Unsplash


No. State estate taxes are not deductible on income tax returns, just on federal estate tax returns. Unfortunately, this is irrelevant for almost everyone, since the federal estate tax threshold currently (in 2023) is $12.9 million, meaning only estates above this amount pay any federal estate tax.

The good news is that everything in your estate will receive a step-up in basis, eliminating any capital gains should your children choose to sell what the receive from your estate.

Related Articles:

Can a Massachusetts Resident Avoid Estate Taxes by Making Gifts to Get Below the $1 Million Threshold?

Does Your State Have Estate or Inheritance Taxes?

Are Proceeds of Recently-Gifted Life Insurance Policies Taxable in Massachusetts Estates?

How Does Massachusetts Tax Estates of Non-Residents with In State Real Estate?

How do Taxable Gifts Work in Massachusetts?

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