Does Colorado Have an Estate Tax?

Based on federal legislation known as the Economic Growth and Tax Relief Reconciliation Act (“EGTRRA”) that Congress enacted in 2001, the Colorado Estate Tax disappeared in 2005.  The reason the Colorado Estate Tax vanished is due to how Colorado’s Estate Tax law was drafted.  Colorado has what is known as the “pick up” tax.  Prior to January 1, 2005, Colorado’s estate tax was determined by the amount of a federal tax credit allowed on a federal estate tax return for the amount of state estate taxes owed to Colorado.  Stated another way, the amount of federal estate taxes actually owed to the IRS was reduced by the amount of estate tax owed to the state of Colorado.  Since the EGTRRA legislation phased out that federal estate tax credit in 2005, Colorado’s state estate tax was effectively phased out.  Based on the present federal tax law, EGTRRA will “sunset” (go away) at the end of 2010 and the pick up tax and thus Colorado’s Estate Tax will return, assuming Congress enacts no new estate tax legislation to address this “pick up” tax.

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