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2014 Changes to Minnesota Estate and Gift Tax

On March 21, 2014, the Minnesota legislature passed HF 1777, enacting significant changes to Minnesota’s estate and gift tax laws.

Minnesota Gift Tax: The new law repeals the state gift tax that was enacted last year, and which applied to certain gifts made after June 30, 2013.  The repeal is retroactive, so donors who made taxable gifts after June 30, 2013 (when the tax became effective) will NOT have to file a Minnesota gift tax return.  Anyone who has already filed a Minnesota gift tax return and paid the tax will receive a refund.  It is important to note that although the gift tax has been repealed, gifts made within three years of the donor’s death will still be included in their taxable estate for Minnesota estate tax purposes.

Minnesota Estate Tax: The new law makes several significant changes to the Minnesota estate tax.  The Minnesota estate tax exemption has been increased from $1 million per individual to

$1.2 million for decedents dying in 2014, and will increase an additional $200,000 each year until the exemption reaches $2 million in 2018.      

Year                                  Exemption Amount

2014                                    $1,200,000

2015                                    $1,400,000

2016                                    $1,600,000

2017                                    $1,800,000

2018 and beyond               $2,000,000

The estate tax bracket has been modified as well.  Whereas before the changes the first $100,000 in excess of $1 million was subject to a tax rate of 41%, the new law starts the tax rate at 9% for estates exceeding $1.2 million and gradually increases to a top tax rate of 16%. 

Contact us if you have any questions about the changes in the law or to discuss your specific circumstance.

Terrance Zawacki