Washington and Oregon Estate Taxes
Last month, we discussed the federal estate tax as well as the estate and gift tax limits under federal tax law. When someone passes away, the federal government will levy a tax on their estate if their estate is worth more than $11.7 million, but only on the portion in excess of $11.7 million. Through lifetime gifts and other methods, parties can reduce the tax burden on their estate. Some states also levy estate taxes, and, as with the federal tax, there are ways to limit your exposure to state estate taxes. Below, we discuss the estate tax schemes in Washington and Oregon. If you need help planning your estate, call a qualified Portland and Vancouver estate planning attorney.
Washington Estate Tax
Washington state does not levy an inheritance tax on beneficiaries to an estate. Washington does, however, employ an estate tax. The estate tax applies to Washington residents as well as non-residents who own property in Washington. The executor of an estate in Washington must file an estate tax if the gross value of all property in the estate (the fair market value before any deductions), wherever located, is over the filing threshold. An estate tax return must be filed even if, after deductions, no tax is owed. The filing threshold in Washington is the same as the exclusion amount.
The current estate tax filing threshold in 2021, which is the same as the exclusion amount, is $2.193 million. That means that the executor of an estate with a gross value of $2,193,000, so long as the decedent either resided in Washington or held property in Washington, must file an estate tax return. Any estate worth less than $2.193 million does not need to file an estate tax return. For estates worth more than that, the first $2.193 million is excluded from the tax, but amounts in excess (after deductions) will be taxed. There are many useful deductions, including for debts and administrative costs, charitable donations, marital deductions (property left to a surviving spouse), farms, and family-owned businesses.
The tax rate for the estate depends on the value of the estate. The Washington “taxable estate” is the amount remaining after all deductions, including the $2.193 million exclusion. The first $1 million of the taxable estate is taxed at 10%. If the taxable amount is between $1 million and $2 million, the tax owed is $100,000 plus 14% of the amount over $1 million. If the taxable amount is between $2 million and $3 million, the tax owed is $240,000 plus 14% of the amount over $2 million. The tax rate increases in that fashion up to $9 million, at which point the tax rate peaks at 20% for amounts above $9 million.
Oregon Estate Tax
Oregon, likewise, has an estate tax. The estate tax applies to Oregon residents as well as anyone who owned taxable property in Oregon if the estate is valued above the threshold. If the total value of all assets in an estate is above $1,000,000, the executor or other representative of the estate must file an estate tax return. As in Washington, as of 2012, the Oregon tax is levied on the estate rather than the beneficiaries (i.e., it’s an estate tax, not an inheritance tax).
Oregon’s estate tax is graduated based on the estate’s value after deductions and after the excluded amount (the first $1 million). The tax starts at 10% and peaks at 16% for estates with a taxable value of more than $9.5 million. Oregon estates are also subject to useful deductions including charitable donations, debts, funeral expenses, estate administration costs, and marital deductions (all property left to a surviving spouse will be deducted).
Call Vancouver Attorney John Lutgens For Estate Planning Assistance in Oregon or Washington State
For trained and effective legal help planning for your financial future in Portland, Vancouver, or elsewhere throughout Oregon and Washington, contact Vancouver estate planning lawyer John Lutgens for a free consultation at 360-693-2119.