Rhode Island State Estate Tax
Rhode Island residents are subject to an estate tax for estates of more than $1,537,656. This tax falls on the estate of the person who died, the beneficiaries or heirs inherit what's left. (There is no inheritance tax in Rhode Island; that kind of tax falls on the heirs and beneficiaries, not on the estate of the person who died.) The maximum Rhode Island estate tax rate is 16%, which is significantly lower than the maximum federal estate tax rate of 40%.
This state estate tax is in addtion to the federal estate tax. The federal estate tax falls on the estate of the person who died, not on the people who inherit that property. The federal tax has an exemption of $10 million, which is indexed to inflation and is currently $11,400,000, and only estates larger than that exemption have to pay estate tax. It's estimated that only the richest .14% of Americans will be subject to the estate tax at all, or only two out of every 1,000 people who die.
If someone dies in Rhode Island with less than the federal exemption amount (currently $11,400,000), their estate doesn't owe any federal estate tax, and if someone dies in Rhode Island with an estate worth less than $1.53 million, there is no Rhode Island estate tax, either. The heirs and beneficiaries inherit the property free of tax. They don't pay income tax on it, either, because inherited property is not ordinary income. The only exception to this are inherited retirement accounts, which are subject to income tax as the assets are withdrawn.
More information about Rhode Island’s estate tax can be found at the Department of Revenue’s website.
You may also be interested in:
There are several different taxes that need to be filed after there's been a death. Learn more about which taxes to file and how to file them.
Each state has its own rules about probate. Find out how they do it in Rhode Island.
When beneficiaries inherit assets, those assets generally receive what's called a "step up"in basis. Understand how this saves beneficiaries taxes on appreciated assets.