Woe be he who decides to die in NYC.  Though the reality is many people choose to move to low inheritance tax states for lifestyle purposes, why should one feel compelled to not live where they want to at the end of their lives?  Sadly, there’s one strata that once again gets crushed again by not doing so: the upper-middle class.  Originally everyone over a certain threshold could not escape the state estate-tax noose, but in recent years CPA’s have found a work around for the extremely wealthy, leaving the few who can’t access the loopholes subjected to very high marginal tax rates to make up the difference.  No reason to beat you up with the details of the loopholes like we did on federal taxes, we give examples of them in the links below.

The state percent tax is a much smaller bite than federal, in NYC it’s 12.7% vs. 40%.  Just keep in mind that unlike the federal $10.4 million threshold for married couples, they start taking it at $2.1 million.  While we’re on the subject of small taxation indignities for the upper-middle class, here are three more on the housing front.  The first is Fannie-Freddie guarantee limits of roughly $625,000 on mortgages.  Borrow a penny more and you’ll be subjected to higher interest rates due to the lack of this guarantee1.  The second is mortgage deductibility, which is only applicable on the first million borrowed.  Finally there is the mansion tax in NY State (and possibly others).  This beauty charges 1% on the full price of homes that are sold for over $1,000,000.  Buy a $995,000 home, pay nothing, but one for $1,001,000 pay $10,100 at closing.  Needless to say, there are plenty of people in California and the Northeast buying $1.5 – 2 million homes, which are far from mansions.

I highlight these three nicks and cuts, not because they are petty, but because I suspect there are many, many more like these.  Some escaped by the extremely wealthy, some not, but all paid by the upper-middle class.  Some are buried in tax arcana, others pretty straightforward.  Please let me know if you find any others, I can be reached at

Next up, the solution…

Wealthy NY Residents Escape Tax With Trusts in NevadaAs fewer Americans pay the estate tax and top earners in New York and California owe more state income taxes, wealth planners say their clients are looking for new ways to escape those levies.

Live Longer and Heirs Will Prosper in New York

  1. I know, the spread on FNM/non-FNM loans has narrowed considerably since 2008, but that’s a quirk of the economy and it’s still costs you more in interest per dollar borrowed []

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