Whether you're settling a loved one’s estate planning mythsor planning ahead to ease the burden on your own family, inheritance taxes can play a major role in what comes next.
After someone passes, inheritance taxes may affect how, and when, assets are distributed to heirs.
For those preparing in advance, understanding how inheritance taxes work can inform key decisions about trusts, gifts, and insurance.
Each state has its own rules, and the details can be easy to overlook until they suddenly matter. In this guide, we’ll walk through what to expect and how to handle inheritance taxes depending on where you live.
TLDR:
- No federal inheritance tax exists in the U.S. Only 5 states actively impose one: KY, MD, NE, NJ, and PA.
- Inheritance tax is paid by the beneficiary; estate tax is paid by the estate before assets are distributed.
- Your state of residence does not determine your tax exposure. The deceased person's state does.
- As of 2026, the federal estate tax exemption is $15 million per individual, affecting very few families.
- Elayne offers estate planning and post-loss support for families working through inheritance tax questions.
First things first: understanding the difference between inheritance tax and estate tax
🧾 Inheritance tax is a tax on the beneficiary
The inheritance tax is imposed on individual recipients of an inheritance based on what they personally receive.
- Who pays it: The beneficiary pays the tax.
- Rates depend on relationship: Closer relatives (like spouses or children) often pay little or nothing, while distant relatives or unrelated individuals pay higher rates.
- Amount of tax is based on: The amount received and the recipient’s relationship to the deceased.
There is no federal inheritance tax in the United States. Some states impose state-level inheritance taxes.
🏛 Estate tax is a tax on the estate itself
The estate tax is a levy on the total value of a deceased person’s assets before they are distributed to heirs.
- Who pays it: The estate pays this tax before any inheritance is passed on.
- Federal estate tax: Imposed by the federal government on estates exceeding a certain threshold
- State estate tax: Some states impose their own estate taxes, often with lower exemption thresholds than the federal level
- Based on: The net value of the entire estate (assets minus liabilities)
| Inheritance Tax | Estate Tax | |
|---|---|---|
| Who pays | The beneficiary | The estate (before distribution) |
| What it's based on | Amount received & relationship to the deceased | Net value of the entire estate (assets minus liabilities) |
| Federal level | No federal inheritance tax | Federal estate tax applies above the exemption threshold |
| State level | 5 states impose it (e.g., KY, MD, NE, NJ, PA) | 12 states + D.C. impose their own estate tax |
| Rate varies by | Heir's relationship (closer relatives often exempt) | Total estate value above the exemption threshold |
A State-by-State Guide to Inheritance Taxes
To make inheritance taxes easier to understand, the team at Elayne has compiled a state-by-state guide for specific state tax implications. However, it’s always smart to work with a professional who can help you work through these complexities and potentially reduce or avoid tax burdens where legally possible.
Alabama Inheritance Tax: Alabama does not have an inheritance tax. Beneficiaries who inherit assets from someone who lived in Alabama will not owe any state-level inheritance tax.
Alaska Inheritance Tax: Alaska does not impose an inheritance tax. Inheritances received in Alaska are not subject to state taxation.
Arizona Inheritance Tax: Arizona has no inheritance tax. Beneficiaries receiving assets from an estate in Arizona will not face state-level tax on their inheritance.
Arkansas Inheritance Tax: There is no inheritance tax in Arkansas. All inherited assets pass free of state-level inheritance tax.
California Inheritance Tax: California does not have an inheritance tax. Individuals who inherit property or assets from a California resident do not owe state inheritance tax.
Colorado Inheritance Tax: Colorado imposes no inheritance tax. Beneficiaries will not be taxed by the state on inherited money or property.
Connecticut Inheritance Tax
There is no inheritance tax in Connecticut, but state estate taxes do apply. Those handling or receiving large estates should consult a professional to understand possible estate tax obligations.
Delaware Inheritance Tax
Delaware does not have an inheritance tax. The state also eliminated its estate tax in 2018, offering a more tax-friendly environment for estates.
Florida Inheritance Tax
Florida imposes no inheritance tax. Beneficiaries inheriting from Florida residents will not owe state tax on their inheritance.
Georgia Inheritance Tax
Georgia has no inheritance tax. Inherited assets in Georgia are not taxed at the state level.
Hawaii Inheritance Tax
There is no inheritance tax in Hawaii, but estates exceeding certain thresholds may be subject to a Hawaii estate tax.
Idaho Inheritance Tax
Idaho does not charge an inheritance tax. Inheritances received in the state are free from state-level inheritance tax.
Illinois Inheritance Tax
Illinois has no inheritance tax, but estates valued over $4 million may owe a state estate tax. Beneficiaries should check estate values carefully.
Indiana Inheritance Tax
Indiana's inheritance tax was fully repealed in 2013. Inheritances received after that date are not taxed by the state.
Iowa Inheritance Tax
Iowa is phasing out its inheritance tax, and it is fully repealed for deaths occurring on or after January 1, 2025. In some cases before that date, tax may still apply depending on the heir’s relationship to the decedent.
Kansas Inheritance Tax
Kansas does not impose an inheritance tax. Beneficiaries in Kansas receive their inheritance free of state-level taxes.
Kentucky Inheritance Tax
Kentucky has an active inheritance tax. It applies based on the heir’s relationship to the deceased:
- Class A (spouse, child, parent): Exempt
- Class B and C (siblings, nieces/nephews, friends): Taxed 4% to 16%
Louisiana Inheritance Tax
Louisiana imposes no inheritance tax. All inherited assets are passed without state-level inheritance tax.
Maine Inheritance Tax
There is no inheritance tax in Maine, but estates over $6.8 million are subject to a Maine estate tax.
Maryland Inheritance Tax
Maryland estate tax is one of the few states with both an inheritance and an estate tax:
- Spouses, children, parents, siblings: Exempt
- Other heirs: Subject to a 10% inheritance tax
Maryland also has an estate tax for estates exceeding $5 million.
Massachusetts Inheritance Tax
Massachusetts does not charge inheritance tax, but estates exceeding $2 million may owe state estate tax.
Michigan Inheritance Tax: Michigan has no inheritance tax. Beneficiaries receive their inheritance tax-free at the state level.
Minnesota Inheritance Tax
There is no inheritance tax in Minnesota, but estates exceeding roughly $3 million may be subject to Minnesota estate tax.
Mississippi Inheritance Tax: Mississippi does not impose an inheritance tax. Inheritances are not taxed by the state.
Missouri Inheritance Tax: There is no inheritance tax in Missouri. Beneficiaries do not owe state tax on inherited assets.
Montana Inheritance Tax: Montana does not have an inheritance tax. Inherited property is not subject to taxation by the state.
Nebraska Inheritance Tax
Nebraska does impose an inheritance tax, with rates based on relationship:
- Immediate family (children, parents): 1% over $40,000
- Extended family (siblings, nieces/nephews): 11% over $15,000
- Others (friends, distant relatives): 15% over $10,000
Note: These rates can vary by county.
Nevada Inheritance Tax: Nevada has no inheritance tax. Inherited money or assets are not taxed by the state.
New Hampshire Inheritance Tax: New Hampshire does not impose an inheritance tax. Inheritances are not taxed at the state level.
New Jersey Inheritance Tax
New Jersey enforces an inheritance tax, with rules based on the heir’s classification:
- Class A (spouse, children, parents): Exempt
- Class C (siblings, in-laws): 11% to 16% on amounts over set thresholds
- Class D (friends, distant relatives): 15% to 16%
The estate tax was repealed in 2018, but the inheritance tax remains in effect.
New Mexico Inheritance Tax: New Mexico has no inheritance tax. Beneficiaries do not pay tax on inherited assets.
New York Inheritance Tax
There is no inheritance tax in New York, but estates over $6.94 million may owe state estate tax.
North Carolina Inheritance Tax: North Carolina does not impose an inheritance tax. Heirs inherit assets tax-free at the state level.
North Dakota Inheritance Tax: North Dakota has no inheritance tax. State tax does not apply to inherited assets.
Ohio Inheritance Tax
Ohio's inheritance tax was repealed in 2013. All inheritances after that are exempt from state inheritance tax.
Oklahoma Inheritance Tax: Oklahoma does not charge inheritance tax. Inherited property is not subject to state taxation.
Oregon Inheritance Tax
There is no inheritance tax in Oregon, but estates over $1 million are subject to state estate tax.
Pennsylvania Inheritance Tax
Pennsylvania imposes one of the broadest inheritance taxes in the U.S., according to the Pennsylvania Department of Revenue:
- Spouse: Exempt
- Children and grandchildren: 4.5%
- Siblings: 12%
- Other heirs: 15%
Rhode Island Inheritance Tax
Rhode Island does not have an inheritance tax, but estates exceeding $1.7 million may owe estate tax.
South Carolina Inheritance Tax: South Carolina imposes no inheritance tax. Assets passed on after death are not taxed at the state level.
South Dakota Inheritance Tax: There is no inheritance tax in South Dakota. Inheritances are state-tax-free.
Tennessee Inheritance Tax
Tennessee repealed its inheritance tax in 2016. Inheritances are no longer taxed by the state.
Texas Inheritance Tax: Texas does not have an inheritance tax. Beneficiaries will not owe taxes on inherited assets at the state level.
Utah Inheritance Tax: Utah imposes no inheritance tax. All inherited property is exempt from state taxation.
Vermont Inheritance Tax
Vermont has no inheritance tax, but estate taxes may apply for estates exceeding $5 million.
Virginia Inheritance Tax: Virginia does not charge inheritance tax. All inheritances are free from state tax.
Washington Inheritance Tax
Washington does not impose an inheritance tax, but estates over $2.193 million are subject to state estate tax.
West Virginia Inheritance Tax: There is no inheritance tax in West Virginia. Inherited property passes without state-level taxation.
Wisconsin Inheritance Tax: Wisconsin imposes no inheritance tax. Beneficiaries are not taxed by the state.
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Wyoming Inheritance Tax: Wyoming has no inheritance tax. Inheritances in the state are not subject to state tax.
What Changed in 2025-2026
A significant federal development now shapes the backdrop of this state-by-state picture. The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently raised the federal estate and gift tax exemption to $15 million per individual (or $30 million for married couples) starting in 2026 and indexed it for inflation going forward. That provision eliminates the sunset that had been scheduled to roughly halve the exemption at the start of 2026.
For most families, the federal estate tax still won't apply, since the $15 million threshold is far above the typical estate. The federal estate tax rate of 40% on amounts above that threshold remains unchanged.
Where the rules continue to vary is at the state level:
- State estate taxes: Twelve states and D.C. still impose their own estate taxes, several with much lower exemption thresholds than the federal level:
- Oregon: estate tax applies to estates over $1 million
- Massachusetts: estate tax applies to estates over $2 million
- State inheritance taxes: Five states, namely Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania, continue to enforce inheritance taxes as before.
- Iowa: Iowa's inheritance tax was fully eliminated for deaths occurring on or after January 1, 2025.
FAQs
What is the difference between an inheritance tax and an estate tax?
An inheritance tax is paid by the beneficiary based on what they personally receive and their relationship to the deceased. An estate tax is paid by the estate itself before any assets are distributed, based on the total net value of the estate. The two can coexist: Maryland, for example, imposes both. There is no federal inheritance tax in the United States, but the federal government does impose an estate tax on estates exceeding $15 million per individual (as of 2026).
Which states currently have an inheritance tax?
As of 2025, five states impose an active inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa's inheritance tax was fully repealed for deaths occurring on or after January 1, 2025. In all five remaining states, surviving spouses are typically exempt, and closer relatives often pay lower rates than distant relatives or unrelated heirs.
Do I owe federal inheritance tax on what I inherit?
No. There is no federal inheritance tax in the United States. What does exist at the federal level is the estate tax, which the estate pays before assets reach beneficiaries. The federal estate tax only applies to estates exceeding $15 million per individual (or $30 million for married couples) as of 2026, a threshold that affects very few families.
If I live in a state without an inheritance tax, am I fully in the clear?
Not necessarily. The state that matters is typically where the deceased lived, not where the beneficiary lives. If someone passes away in Pennsylvania, Pennsylvania's inheritance tax rules apply to their estate regardless of where the heirs reside. Some states without an inheritance tax still impose a state-level estate tax, which the estate pays before distribution. Oregon, Massachusetts, and Washington are examples.
What changed about inheritance and estate taxes in 2025 and 2026?
Two notable changes took effect. First, Iowa fully eliminated its inheritance tax for deaths occurring on or after January 1, 2025, leaving five states with an active inheritance tax. Second, the One Big Beautiful Bill Act, signed July 4, 2025, permanently raised the federal estate and gift tax exemption to $15 million per individual (indexed for inflation going forward), eliminating a scheduled sunset that would have roughly halved that threshold. State-level inheritance and estate taxes were not affected by this federal change and continue to vary a great deal by state.
As estate laws and inheritance taxes continue to evolve, we recommend staying up to date and consulting with professionals.
Whether you're preserving your legacy or honoring someone else's, understanding the tax rules helps make sure that more of the wealth stays with the people and causes that matter most.
Talk to the team at Elayne if you need additional estate planning or post-loss support related to inheritance taxes.
This content is for informational purposes only and does not constitute legal, financial, medical, or tax advice. Laws and regulations vary by state and individual circumstances differ. Consult a licensed attorney, financial advisor, or other qualified professional for guidance specific to your situation.
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