What Are New York Estate Taxes?
New York imposes a state estate tax on the transfer of assets from a deceased person to their beneficiaries. This is separate from the federal estate tax, and New York has its own exemption threshold, rates, and rules. The estate tax is based on the total value of the decedent’s taxable estate at the date of death — including real property, bank accounts, investments, life insurance payable to the estate, and retirement accounts.
The Executor or Administrator is responsible for determining whether an estate tax return must be filed, filing it on time, and paying any tax owed before distributing assets to beneficiaries. In Nassau County, estate tax issues frequently arise because of high property values on Long Island — many estates that families assume are "modest" turn out to be close to or above the filing threshold once real estate is appraised at fair market value.
Key Tax Forms
There are four forms that come up repeatedly in Nassau County estate tax matters. Understanding what each one does — and when you need it — is critical.
ET-85 — New York Estate Tax Return
The ET-85 is the New York State estate tax return. It is filed with the New York State Department of Taxation and Finance and reports the total value of the decedent’s estate, deductions, and the tax owed (if any). The ET-85 is due nine months after the date of death. A six-month extension can be requested using Form ET-133, but the extension is for filing only — any estimated tax owed must still be paid by the nine-month deadline to avoid interest and penalties.
ET-117 — Release of Estate Tax Lien
When a New York resident dies, a statutory lien automatically attaches to all real property in the estate. The ET-117 is the form you file to request a release of that lien from the Department of Taxation and Finance. Until you receive the lien release, you cannot transfer or sell real property owned by the estate. Title companies will not insure the transaction without it.
ET-14 — Estate Tax Domicile Affidavit
The ET-14 establishes the decedent’s domicile (legal residence) at the time of death. This matters because New York can only tax estates of New York domiciliaries (plus New York real property owned by non-residents). If there is any question about whether the decedent was domiciled in New York — for example, if they spent part of the year in Florida — the ET-14 is used to document the claim. Domicile disputes are common among retirees who split time between New York and another state.
IT-2663 — Real Property Transfer Gains Tax
The IT-2663 is filed when real property is transferred by a nonresident estate or when certain real property transfers trigger estimated personal income tax obligations. If the estate is selling property and the decedent was not a New York resident, this form ensures the state collects any capital gains tax on the appreciation of the property. Even for resident estates, your closing attorney or title company may require documentation related to this form.
Exemption Thresholds (2026)
For deaths occurring in 2026, the following exemption thresholds apply:
- New York State exemption: $7.35 million. Estates at or below this amount owe no New York estate tax. However, if the estate exceeds this threshold by more than 5%, the entire estate is subject to tax — not just the excess. (See the cliff effect below.)
- Federal exemption: $15 million. The Big Beautiful Bill Act permanently set the federal estate tax exemption at approximately $15 million per individual (indexed for inflation). Estates below this amount owe no federal estate tax. The federal exemption is portable between spouses — a surviving spouse can use the deceased spouse’s unused exemption by filing a federal estate tax return (IRS Form 706) and making the portability election.
For most Nassau County estates, the federal exemption is high enough that federal estate tax is not a concern. The New York threshold, however, catches many more families — particularly those with significant real estate holdings on Long Island, where even a single home can be valued at $1 million or more.
The New York "Cliff Effect"
New York’s estate tax has a feature that catches many people off guard: the cliff effect. Unlike the federal estate tax, which only taxes the amount above the exemption, New York’s system works differently — and much more harshly.
Here is how it works: if your taxable estate is at or below the exemption amount ($7.35 million in 2026), you owe nothing. If your estate exceeds the exemption by a small amount — up to 5% over — you still get a partial benefit from the exemption, though the tax phases out rapidly. But if your estate exceeds the exemption by more than 5% (i.e., the estate is worth more than approximately $7.72 million in 2026), the exemption disappears entirely. The tax is then calculated on the entire estate from the first dollar — not just the amount over the threshold.
This creates a "cliff" where a relatively small increase in estate value can trigger hundreds of thousands of dollars in additional tax.
Because of the cliff effect, estates that are close to the exemption threshold require careful valuation and planning. Executors should work with an accountant or estate attorney to determine whether asset valuations, deductions, or other strategies can bring the estate below the threshold. Even small changes — such as properly claiming funeral expenses, administration costs, or outstanding debts as deductions — can make the difference between zero tax and a six-figure bill.
When Is ET-85 Required?
Not every estate must file a New York estate tax return. The ET-85 is required in the following situations:
- The gross estate exceeds the filing threshold for the year of death. For 2026 deaths, this means a gross estate (before deductions) that exceeds $7.35 million. Note that this includes the value of assets that pass outside of probate — joint accounts, life insurance, retirement accounts with named beneficiaries, and revocable trusts.
- A federal estate tax return (Form 706) is required to be filed. If you must file a federal return, you must also file the ET-85 with New York, regardless of whether New York tax is actually owed.
- The estate elects portability on the federal return. Even if the estate is below the federal threshold, some estates file Form 706 solely to elect portability of the deceased spouse’s unused exclusion. If a federal return is filed for this reason, a New York ET-85 must also be filed.
When ET-85 Is NOT Required
If the gross estate is below the New York filing threshold and no federal return is required, no ET-85 needs to be filed. However, even in these cases, you may still need to file an ET-117 to release the automatic lien on any real property. Many families are surprised to learn that even though no tax is owed, the lien exists by operation of law and must be formally released before property can be sold.
Step-by-Step Tax Filing Process
Step 1: Determine Whether Filing Is Required
Calculate the gross estate, including all assets — probate and non-probate. If the total exceeds the New York exemption for the year of death, or if a federal return is required, you must file the ET-85. If the estate owns real property, you will also need the ET-117 regardless of whether tax is owed.
Step 2: Obtain Appraisals
Get date-of-death valuations for all significant assets. For real property, this means a formal appraisal from a licensed appraiser reflecting fair market value as of the date of death. For financial accounts, obtain statements showing balances on the date of death. For closely held businesses, a business valuation may be needed.
Step 3: File the ET-117 Early
If the estate includes real property, file the ET-117 (Application for Release of Estate Tax Lien) as soon as possible — even before the ET-85 is complete. Processing times are long, and you do not want a property sale delayed because you waited to file. You can file the ET-117 with estimated values if the formal appraisal is not yet complete.
Step 4: Prepare and File the ET-85
Complete the ET-85 with all required schedules. The return is filed with the New York State Department of Taxation and Finance (not with the Surrogate’s Court). The filing deadline is nine months after the date of death. If you need more time, file Form ET-133 for a six-month extension — but pay any estimated tax by the nine-month deadline to avoid interest.
Step 5: Pay the Tax
If tax is owed, payment is due with the return (or by the nine-month deadline if an extension is filed). Payment can be made by check or electronic funds transfer. Interest accrues on late payments from the original due date.
Step 6: File the Federal Return if Required
If the estate exceeds the federal exemption, or if you are electing portability, file IRS Form 706. The federal deadline is also nine months after death, with a six-month extension available. Coordinate the federal and state returns — the ET-85 requires information from the federal return.
Step 7: Receive the ET-117 Lien Release
After the Department of Taxation and Finance processes the ET-117, they will issue a release of lien. File this release with the Nassau County Clerk’s office to clear the title on any real property. Only after this is recorded can property be sold or transferred with clear title.
ET-117 Timeline Warning
The single most common estate tax problem in Nassau County is underestimating how long it takes to get an ET-117 lien release. The Department of Taxation and Finance does not process these quickly. Current processing times can range from three to six months or longer, depending on the complexity of the estate and the department’s backlog.
In the Bonaparte case, an estate in Nassau County had a buyer under contract for the decedent’s home. Everything was ready to close — the title search was clear, the buyer’s mortgage was approved, and the closing date was set. But the ET-117 lien release had not been received from the state. The closing had to be postponed repeatedly while the Executor waited for the release to arrive. The buyer nearly walked away, and the estate incurred additional carrying costs (property taxes, insurance, maintenance) during the months of delay. The entire situation was avoidable — had the ET-117 been filed immediately after Letters were issued, the release would have been in hand before the buyer even made an offer.
Common Issues
- The cliff effect catches families off guard. Many Executors do not learn about New York’s cliff until the tax return is prepared. By then, it may be too late to adjust. Estates that are within 5–10% of the exemption threshold should consult a tax professional immediately to explore whether deductions or valuation methods can bring the estate below the cliff.
- Late ET-117 delays property sales. As described above, this is the most frequent problem. The lien release takes months, and there is no way to expedite it through the Department of Taxation and Finance. The only solution is to file early.
- Undervaluation of assets. The Department of Taxation and Finance reviews estate tax returns and may challenge valuations it considers too low. Real property is the most common target — particularly on Long Island, where property values have appreciated significantly. Using a qualified, licensed appraiser and documenting the methodology is essential. If the state challenges a valuation, the resulting audit can delay the entire estate for a year or more.
- Forgetting non-probate assets. The taxable estate for New York estate tax purposes includes assets that do not go through Surrogate’s Court — jointly held property, life insurance, retirement accounts with named beneficiaries, payable-on-death accounts, and revocable trust assets. Executors sometimes omit these from the return, leading to audits and penalties.
- Missing the nine-month deadline. The ET-85 is due nine months after the date of death. If you need more time, you must file the extension (ET-133) before the deadline and still pay estimated tax. Filing late without an extension triggers penalties and interest.
- Failing to elect portability on the federal return. For married couples, the surviving spouse can use the deceased spouse’s unused federal exemption — but only if a federal return is filed and the portability election is made. This is a one-time opportunity that is lost if the return is not filed. Even if no federal tax is owed, filing Form 706 to preserve portability can save the surviving spouse’s estate millions in future taxes.
Frequently Asked Questions
Does every estate have to file an estate tax return?
No. The ET-85 is only required if the gross estate exceeds the New York filing threshold ($7.35 million in 2026) or if a federal estate tax return must be filed. Most estates in Nassau County are below this threshold and do not need to file. However, if the estate owns real property, you still need to file an ET-117 to release the automatic tax lien — even if no tax is owed.
What is the difference between the ET-85 and the ET-117?
The ET-85 is the New York estate tax return — it reports the estate’s value and calculates any tax owed. The ET-117 is a separate application to release the automatic lien that attaches to real property when someone dies. You may need the ET-117 even if you do not need the ET-85. They are filed with the same agency (Department of Taxation and Finance) but serve different purposes.
How does the New York cliff effect differ from the federal estate tax?
The federal estate tax uses a straightforward exemption: you only pay tax on the amount that exceeds the exemption. If the federal exemption is $15 million and your estate is worth $16 million, you pay tax on $1 million. New York does not work this way. If your estate exceeds the New York exemption by more than 5%, the entire estate is taxed from the first dollar. This means a small increase in estate value can trigger a massive tax bill — which is why it is called a "cliff."
How long does it take to get an ET-117 lien release?
Current processing times range from three to six months, and sometimes longer. The Department of Taxation and Finance does not offer an expedited process. This is why filing early is critical — especially if the estate needs to sell real property. If a closing is scheduled and the lien release has not arrived, the closing will be delayed.
Can I sell estate property before receiving the ET-117 lien release?
Practically, no. While the property can be listed for sale and a contract can be signed, the closing cannot take place without the lien release. Title insurance companies will not insure the transaction, and no buyer’s attorney will allow their client to close on a property with an outstanding estate tax lien. See our Selling Estate Property guide for more detail on this process.
What happens if the estate is close to the cliff — can anything be done?
Yes. If the estate is near the exemption threshold, there are several legitimate strategies. Maximizing deductions — funeral expenses, administration costs, outstanding debts, and charitable bequests — can reduce the taxable estate below the cliff. Proper appraisal methodology matters too: selecting an appropriate valuation date and documenting any factors that reduce property value (deferred maintenance, market conditions, encumbrances) can make a significant difference. These decisions should be made with the guidance of an estate tax attorney or CPA who understands New York’s rules.