CCH Financial Planning Toolkit | District of Columbia Estate Taxes

Thursday, December 04, 2008

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District of Columbia Estate Taxes

The District of Columbia assesses an estate tax that is equal to the maximum federal credit for state death taxes under the Internal Revenue Code as it existed on January 1, 1986. This means that the District of Columbia has "decoupled" its estate tax laws from current federal estate tax laws, especially the scheduled reduction and elimination of the state tax credit.

As a result, a District of Columbia estate tax return (Form D-76) may have to be filed even when no federal estate tax return (Form 706) is required. For example, the current federal filing exemption amount for 2004 and 2005 is $1.5 million, while the D.C. return must be filed if the gross estate is $1 million or more for deaths occurring on or after January 1, 2003.

Deductions. Because D.C. estate tax laws are still essentially based on the federal system, the same types of federal estate deductions apply when determining the taxable D.C. estate. In fact, according to the instructions for Form D-76, IRS Form 706 must be used to figure out any allowable deductions from the gross estate (regardless of whether a Form 706 is filed) when filling out the D.C. return.

Returns. The personal representative responsible for administering the estate subject to the D.C. tax must file a Form D-76 or Form D-76EZ and pay any taxes owed within 10 months after the death of the decedent. A six-month filing extension may be granted by filing Form FR-77, District of Columbia Application for Extension of Time.

Form D-76 is the basic D.C. estate tax return. Form D-76 EZ must be filed if the value of the taxable estate is reduced to zero because it passes to a surviving spouse or is donated to charity.

If an amended federal estate tax return is filed or a federal adjustment is otherwise made, an amended D.C. estate tax return (Form D-76A) must be filed. A copy of the amended federal return or the adjustment report must be attached to Form D-76A.

Generation-skipping transfer tax. The District of Columbia does not impose a generation-skipping transfer tax.