The Ohio Estate Tax is Dead.

Posted by

Yesterday the Ohio House of Representatives passed HB 153, which was the FY 2012-13 budget for the State of Ohio.  One of the many provisions of the Bill is the repeal of the Ohio Estate Tax effective for estates of decedents who die on January 1, 2013 or after.  Ohio retains its “additional tax,” or “sponge tax” which is equal to the State Death Tax Credit on Federal taxable estates, however, under current federal law, the State Death Tax Credit was converted to a deduction for state death taxes paid, and therefore, Ohio currently will not receive any estate tax revenue.  Mainly this affects local government in Ohio.  Under current law, 20% of the estate tax stays at the state level with 80% returned to the local governmental units where the decedent lived.  This cut will further strain local budgets.

Much will depend on the fate of the federal estate tax – under current law, the federal estate tax reverts back to 2001 law beginning on January 1, 2013 with a $1 million exemption, a maximum rate of 55% and the return of the State Death Tax Credit.  If the federal tax reverts back to the Credit rather than the current deduction, Ohio will generate tax revenue on all federally taxable estates – at no additional cost to the estate.  The amount paid to Ohio will just come out of the Federal Tax.

Governor Kasich is expected to sign the bill today meeting the deadline for the budget – June 30.

Time will tell.  For now, it is a good opportunity to let you’re clients know that the tax has been repealed and it’s a good idea to look over their estate plans.