Arizona's Estate Tax, or Lack Thereof

Although it's fairly well-known that the federal estate tax was repealed for 2010 but returned in 2011, what is the status of Arizona's estate tax? As of January 2011, Arizona does not collect an estate tax, known to many as an inheritance tax.

Prior to 2005, Arizona imposed an estate tax equal to the amount of the federal estate tax credit. However, The Economic Growth and Tax Relief Reconciliation Act of 2001, which phased out the federal estate tax until 2011, also eliminated the federal credit which had the effect of eliminating the state-level estate tax.

Although the estate tax returned in 2011, the Tax Relief Act of 2010 did not reinstate the state-level estate tax credit. Further, in 2006, Arizona officially & permanently repealed Arizona's estate tax. This means that, unlike the federal estate tax which was temporarily repealed until 2011, Arizona's estate tax will not return unless the Arizona Legislature reinstates the estate tax via legislation.

This brief overview of some important considerations associated with Arizona's estate tax is by no means comprehensive. Always seek the advice of a competent tax professional when making important estate tax decisions.

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