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Is there a California estate tax? If so, how is it calculated?

by Dick Nadler, CPA

Yes, California has an estate tax. It essentially is what is called the "state tax credit" that is computed on the federal Internal Revenue Services' Form 706. Once the state tax credit is computed, California says it is entitled to that amount.

You compute the credit as follows: Reduce the gross estate by allowable deductions, then deduct a standard allowance of $60,000. The resulting figure is the adjusted taxable estate. If the adjusted taxable estate is $39,999 or less, then there is no state tax credit and, thus, no California estate tax. If the adjustable taxable estate is worth $40,000 or more, you use a multiplier to determine the actual state tax credit, or California estate tax. The multiplier is based on a sliding scale. Adjusted taxable estates valued between $40,000 to $89,999 use a multiplier of 0.8 percent. Estates valued at $10,040,000 or more use a multiplier of 16 percent. Thus the state tax credit (California estate tax) for an estate valued at $40,000 is $320 ($40,000 x 0.8 percent).

IRS Form 706 contains detailed instructions for computing the state tax credit. For additional information, please contact a certified public accountant.

Dick Nadler, CPA, is principal of Nadler Accountancy Corp., Orangevale, Calif., and a member of the California Society of CPAs, Sacramento chapter. His e-mail address is dick@nadlercpa.com.

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