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Two Tax Systems. One Estate. The Math Doesn't Always Work the Way You'd Expect.

New York has its own estate tax system, its own exemption threshold, and a filing requirement that catches many executors off guard. If you're administering a New York estate and aren't sure whether state tax is owed, here's what you need to know — and how I can help you get it right.

Does the Estate Need to File a New York Estate Tax Return?

For state-taxable estates, New York requires a separate filing on Form ET-706 — completely independent of any federal estate tax obligation. The two systems don't mirror each other. An estate can owe New York estate tax without owing a dollar of federal estate tax, because New York's exemption threshold is significantly lower than the federal exemption.

 

For 2024, the New York State estate tax exemption is $6.94 million. Estates with a gross taxable value above that threshold must file Form ET-706 with New York State. Estates below the threshold generally do not file — but the line between "below" and "above" matters more in New York than in most states, because of the cliff provision.

The New York Estate Tax Cliff — Why Being Just Over the Threshold Is Costly

New York's cliff provision is one of the most consequential — and least understood — features of state estate tax law. In most tax systems, only the amount above an exemption threshold gets taxed. New York works differently.

 

If an estate's gross value exceeds the exemption by more than 5%, the estate loses the exemption entirely. The full value of the estate becomes taxable, not just the excess above the threshold. For an estate sitting just above the cliff, this can mean tens of thousands of dollars in additional tax compared to an estate just below it.

 

This is not a detail that shows up on federal returns or in generic estate planning guides. It's a New York-specific rule that requires someone who works with New York estates regularly — not someone who pulls up the statute when the situation arises.

What Form ET-706 Preparation Actually Involves

Preparing a New York estate tax return is more involved than most executors expect. It requires a complete picture of the estate's assets, applicable deductions, credit calculations, and coordination with the estate attorney on timing and any extension filings. Here's what the process covers:

 

  • Determining whether the estate meets the filing threshold under New York law
  • Valuing estate assets in accordance with New York requirements
  • Calculating applicable deductions, including marital deductions and charitable deductions
  • Applying the New York State estate tax credit and any other available credits
  • Coordinating with the estate's attorney on filing deadlines and extension elections
  • Preparing the return for review, signature, and submission with supporting documentation

 

New York estate tax returns are a primary, recurring part of my practice. I'm not looking up the rules as each engagement comes in — I know them, and I apply them to every filing I prepare.

Working with Estate Attorneys on ET-706 Filings

Estate attorneys routinely refer clients to me for this specific work. The attorney handles the legal administration of the estate; I handle the tax side — including the ET-706, the companion fiduciary income tax return on Form 1041, and the required New York IT-205 filing where applicable.

 

If you're an estate attorney looking for a CPA who can take the tax preparation off your plate and deliver clean, on-time filings you can rely on, I work with attorneys across Long Island and New York City on exactly this basis. Clients in Nassau County, Suffolk County, and the five boroughs are all within my regular service area, and I handle remote engagements for estates with out-of-state executors as well.

Why Your CPA Needs to Know New York Estate Tax Specifically

New York estate tax is a narrow, technical area. The cliff provision, the state-specific exemption, the ET-706 filing requirements, the interaction with the federal return — these are details that require direct, repeated experience with New York estates to handle confidently.

 

Many general practice CPAs encounter a New York estate tax return once every few years. For me, it's a core part of what I do. If you're an executor or trustee working through the administration of a New York estate, you deserve a CPA who can answer your questions directly, explain the numbers clearly, and file accurately and on time — without treating this as a learning exercise.

frequently asked questions

Helpful answers for people preparing for what’s next.

  • What is the New York estate tax exemption for 2024?

    The New York State estate tax exemption for 2024 is $6.94 million. Estates with a gross taxable value above this threshold are required to file Form ET-706 with New York State. This exemption is separate from — and lower than — the federal estate tax exemption, so an estate can owe New York tax even when no federal estate tax is due.

  • What is the New York estate tax cliff, and how does it work?

    New York's cliff provision means that if an estate's gross value exceeds the exemption by more than 5%, the estate loses the full exemption — not just the excess above the threshold. The entire estate becomes taxable. This can result in a significantly higher tax bill for estates that are only modestly over the threshold, which makes accurate valuation and planning especially important.

  • When is Form ET-706 due, and can it be extended?

    Form ET-706 is generally due nine months after the date of death. New York does allow for an extension of time to file, though an extension to file is not an extension to pay — any tax owed is still due within the original nine-month window. I handle both the filing and extension coordination as part of the engagement.

  • Do I need to file a New York estate tax return if no federal estate tax return is required?

    Yes, potentially. Because New York's exemption threshold is lower than the federal threshold, many estates that fall below the federal filing requirement still owe New York estate tax and must file Form ET-706. The two systems are evaluated independently, so you can't use the federal determination to answer the state question.

  • Can you prepare both the estate income tax return and the New York estate tax return?

    Yes — and in most cases, handling both together is the more efficient approach. I prepare Form 1041 (the fiduciary income tax return for the estate or trust) along with the required New York IT-205 companion filing, and Form ET-706 where applicable. Having one CPA handle the full tax picture reduces coordination time for the estate attorney and ensures the returns are consistent with each other.