Governor Cuomo Proposes New York Tax Changes

Governor Cuomo has proposed a change to New York’s Estate and Gift Tax law that will require all taxable gifts made by a New York resident after March 31, 2014 to be included in the gross estate when calculating the New York estate tax. Like most states, New York does not have a gift tax.

The New York gift tax was repealed in 2000 and since the repeal of the New York gift tax, New York residents have been making gifts without directly subjecting these gifts to New York estate tax.

Thus, Governor Cuomo’s proposal, while not changing the gift tax, would cause New Yorkers who make taxable gifts after March 31, 2014, to include those taxable gifts as part of their gross estate.

On a positive note, the Governor’s proposal also gradually increases the New York estate tax exemption amount over the next five years from the current $1,000,000 to $5,250,000, which is indexed for inflation and the top current estate tax rate will decline from 16% to 10%. The combination of an increase in the exemption and a reduction in the top tax rate would exempt nearly 90% of all estates from the imposition of the estate tax.

While this legislation is only at the proposal stage, New Yorkers who have significant estates should consider making taxable gifts prior to April 1, 2014, especially if they have not used up their federal exclusion amount.