Do I have to pay taxes on my inheritance?

In most cases: no. Inheritances are NOT income and are not taxed on your federal income tax return. Inheritance tax only applies in 6 states — and even there, spouses are always exempt and children often pay 0% or very low rates.

What's the difference between inheritance tax and estate tax?

Inheritance tax is paid by the HEIR based on their relationship to the deceased. Estate tax is paid by the ESTATE based on total estate value. They're separate taxes. Maryland is the only state with both.

Do spouses pay inheritance tax?

No — surviving spouses are exempt from inheritance tax in all 6 states that charge it. Spouse exemption is universal.

How much inheritance tax do children pay?

Depends on the state. Kentucky: 0%. Maryland: 0%. Nebraska: 1% above $100,000. New Jersey: 0%. Pennsylvania: 4.5% on the full amount (no exemption). Iowa: repealed.

Is the federal estate tax exemption changing in 2026?

The current $13.61 million exemption is scheduled to drop to approximately $7 million when the Tax Cuts and Jobs Act provisions sunset. This could affect significantly more estates. Consult a tax professional for current thresholds and planning strategies.

Is there a federal inheritance tax?

No. There is no federal inheritance tax. The federal government has only an estate tax, which is paid by the estate (not the heir) and only kicks in for estates above $13.61 million in 2026 — affecting fewer than 0.1% of estates. Inheritance tax is purely a state-level matter, charged by only 6 states: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania (Iowa repealed its inheritance tax effective January 2025).

What's the federal inheritance tax for 2025 or 2026?

There is no federal inheritance tax — for any year. The federal government taxes large estates through the estate tax (paid by the estate before distribution), not heirs directly. The 2026 federal estate tax exemption is $13.61 million per person ($27.22 million for married couples). Estates below that threshold owe zero federal tax. The exemption is scheduled to drop to roughly $7 million per person on January 1, 2026 unless Congress extends current law.

Do I have to pay state taxes on an inheritance?

Only if the deceased lived in one of 6 states that charge inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania (Iowa repealed it for deaths after January 1, 2025). The tax is based on where the deceased lived, not where you live. So if your aunt lived in Pennsylvania and you live in Florida, you may owe PA inheritance tax even though Florida has no such tax.

How do I avoid inheritance tax in Pennsylvania?

PA inheritance tax can be reduced through lifetime gifts (gifts made over 1 year before death are exempt), spousal transfers (taxed at 0%), charitable bequests (fully exempt), life insurance with named beneficiaries (paid directly to beneficiary, exempt), and qualifying family-owned business exemptions. Most strategies work best when planned years in advance with an estate planning attorney.

Inheritance Tax by State 2026: Which 6 States Charge It (Full Rates)

Q: Which states have an inheritance tax?

Six states: Iowa (repealed 2025 — verify), Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. In all other states, heirs pay $0 in inheritance tax.

Most People Pay ZERO Inheritance Tax

Only 6 states charge an inheritance tax: Iowa (repealed effective 2025 — verify), Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. If the deceased lived in one of these states (or owned property there), you may owe tax on what you inherit. In all other states — nothing.

And even in those 6 states: spouses pay $0. Children often pay $0 or very low rates. The highest rates hit distant relatives and non-family inheritors.

"Before you panic about taxes on your inheritance: check the state, check your relationship to the deceased, and check the exemption. Most heirs owe nothing."

Inheritance Tax vs Estate Tax — They're Different

INHERITANCE TAX

Paid by the HEIR (the person receiving the money)
Based on the relationship between the heir and the deceased
Only exists in 6 states
Closer relatives pay less (or nothing). Distant relatives and non-family pay more.

ESTATE TAX

Paid by the ESTATE (before anyone inherits)
Based on the total value of the estate
Federal estate tax: estates over $13.61 million (2024)
State estate tax: exists in 12 states + DC (thresholds vary, often $1M-$5.85M)

The key difference: Inheritance tax is about WHO receives it. Estate tax is about HOW MUCH there is. They're separate taxes — and in Maryland, you can owe BOTH.

"If you Googled 'do I pay tax on my inheritance' — you're probably worried about inheritance tax. If the deceased's estate was under $13.61 million (federal) and under your state's threshold — you're likely fine on estate tax too."

The 6 States With Inheritance Tax: Rates and Exemptions

Iowa Inheritance Tax — Repealed January 2025

Status: REPEALED effective January 1, 2025. Iowa phased out its inheritance tax over several years. Deaths occurring on or after January 1, 2025 are NOT subject to Iowa inheritance tax. Verify current status for recent deaths.

Kentucky Inheritance Tax — Rates, Exemptions & How to Avoid It

Heir Category	Tax Rate	Exemption
Class A: Spouse, children, grandchildren, parents, siblings	0%	Fully exempt
Class B: Nieces, nephews, aunts, uncles, sons/daughters-in-law	4%-8%	First $1,000 exempt
Class C: Everyone else (friends, distant relatives, non-family)	6%-16%	First $500 exempt

"In Kentucky, your spouse and kids pay nothing. Your nephew pays 4-8%. Your friend pays 6-16%."

Maryland Inheritance Tax — Rates and Exemptions

Heir Category	Tax Rate	Exemption
Spouse, children, grandchildren, parents, siblings, charities	0%	Fully exempt
Everyone else	10% flat rate	First $1,000 exempt

⚠️ Maryland is the ONLY state with BOTH an inheritance tax AND an estate tax. The estate pays estate tax (on estates over $5 million), and certain heirs pay inheritance tax (10%) — on the same estate. Double taxation is possible.

Nebraska Inheritance Tax — Rates and Exemptions

Heir Category	Tax Rate	Exemption
Spouse	0%	Fully exempt
Parents, children, grandchildren, siblings	1%	First $100,000 exempt
Aunts, uncles, nieces, nephews, in-laws	11%	First $40,000 exempt
Everyone else	15%	First $25,000 exempt

"Nebraska is one of the few states where CHILDREN pay inheritance tax — but at only 1% above a $100,000 exemption. A child inheriting $200,000 owes $1,000."

New Jersey Inheritance Tax — Rates and Exemptions

Heir Category	Tax Rate	Exemption
Class A: Spouse, children, grandchildren, parents	0%	Fully exempt
Class C: Siblings, sons/daughters-in-law	11%-16%	First $25,000 exempt
Class D: Everyone else	15%-16%	No exemption
Class E: Charities, government	0%	Fully exempt

"New Jersey exempts close family but hits siblings at 11-16% — one of the highest sibling rates in the country."

Note: New Jersey eliminated its estate tax in 2018 but KEPT its inheritance tax.

Pennsylvania Inheritance Tax — Rates and How to Avoid It

Heir Category	Tax Rate	Exemption
Surviving spouse	0%	Fully exempt
Children (and lineal descendants)	4.5%	No exemption (applied to full amount)
Siblings	12%	No exemption
Everyone else	15%	No exemption
Charities	0%	Fully exempt

"Pennsylvania is the toughest state for heirs. Children pay 4.5% on EVERYTHING they inherit — no exemption. A child inheriting $500,000 owes $22,500. Siblings pay 12%. Friends pay 15%."

How to Avoid Pennsylvania Inheritance Tax

PA's inheritance tax has the broadest reach of any state — even adult children pay 4.5% on everything they inherit. Strategies that work:

Lifetime gifts. PA does not tax gifts. Gifts made within 1 year of death are pulled back into the estate, but anything older is fully exempt.
Spousal transfers. Property left to a surviving spouse is taxed at 0%. Couples can use this to defer the tax until the second death.
Charitable bequests. Gifts to qualified charities are fully exempt.
Joint ownership with right of survivorship. Half the joint property may be excluded if held with the surviving spouse for 6+ months. (This is complex — consult a PA estate planning attorney.)
Life insurance. Life insurance proceeds paid directly to a named beneficiary (not the estate) are exempt from PA inheritance tax.
Family business exemption. PA has a "qualified family-owned business" exemption that can fully exempt closely-held business interests.

The right strategy depends on your asset mix and family structure. PA inheritance tax planning typically pays off for estates above $500,000.

The 44 States With No Inheritance Tax

If your state isn't listed above — you're clear.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, District of Columbia.

"If the deceased lived in one of these states AND didn't own property in one of the 6 inheritance tax states — you owe $0 in inheritance tax. Period."

But wait — what about estate tax? 12 states + DC have their OWN estate tax (separate from inheritance tax). These are paid by the ESTATE before you inherit — not by you as the heir. The estate tax reduces what you receive but you don't write a check.

Does West Virginia Have Inheritance Tax?

No. West Virginia is one of the 44 states with NO state inheritance tax and NO state estate tax. WV residents pay no state-level death tax of any kind. The only tax that may apply to a WV inheritance is the federal estate tax — but that only kicks in for estates above $13.61 million in 2026, affecting fewer than 0.1% of estates.

This means: if you inherit money or property from someone who lived in West Virginia, you owe nothing to the state of West Virginia.

Estate Tax — Paid by the Estate, Not the Heir

State	Estate Tax Threshold	Top Rate
Connecticut	$13.61M (matches federal)	12%
District of Columbia	$4.71M	16%
Hawaii	$5.49M	20%
Illinois	$4M	16%
Maine	$6.41M	12%
Maryland	$5M	16%
Massachusetts	$2M	16%
Minnesota	$3M	16%
New York	$6.94M	16%
Oregon	$1M	16%
Rhode Island	$1.77M	16%
Vermont	$5M	16%
Washington	$2.19M	20%

Federal estate tax: Applies to estates over $13.61 million (2024). Rate: 18%-40%. Affects fewer than 0.1% of estates.

"Estate tax is the ESTATE'S problem — not yours personally. The executor pays estate tax from estate assets before distributing to heirs. Your inheritance is what's left AFTER the estate pays its taxes."

⚠️ Important 2026 note: The current $13.61M federal estate tax exemption is scheduled to drop to approximately $7M in 2026 under the Tax Cuts and Jobs Act sunset. This means many more estates could be subject to federal estate tax starting in 2026. Consult a tax professional for current thresholds.

How to Reduce or Avoid Inheritance Tax

Legal strategies for the 6 states that charge it:

Strategy 1: Give gifts while alive

Most inheritance tax applies to assets transferred at death. Gifts made while alive may not be subject to inheritance tax (rules vary by state). The federal gift tax exemption allows $18,000 per recipient per year (2024) tax-free.

Strategy 2: Use a trust

Certain irrevocable trusts can remove assets from the inheritance tax calculation. A trust distributes assets according to its own terms — potentially bypassing the inheritance tax structure. Requires an estate planning attorney in the relevant state.

Strategy 3: Charitable bequests

Bequests to qualified charities are exempt from inheritance tax in all 6 states. Leaving a portion to charity reduces the taxable inheritance for other heirs.

Strategy 4: Life insurance

Life insurance proceeds paid to a named beneficiary generally bypass inheritance tax in most states (because the proceeds go directly to the beneficiary, not through the estate). However, rules vary — consult a tax professional.

Strategy 5: Relocate (extreme)

If you move from a state WITH inheritance tax to one WITHOUT, your heirs may avoid the tax entirely. This is a drastic measure — but for large estates, it can save hundreds of thousands of dollars.

"For most families in the 6 inheritance tax states: the tax is modest (0-4.5% for close family). For large estates or non-family inheritors (10-16%): consult an estate planning attorney. The cost of planning ($1,500-$5,000) is far less than the tax bill."

Do I Need to File Anything?

In the 6 inheritance tax states: The executor typically files the inheritance tax return with the state. The HEIR may also need to file in some states. Check with the state's Department of Revenue or a CPA.

Filing Deadlines

State	Filing Deadline
Kentucky	18 months after death
Maryland	Filed with estate tax return (9 months)
Nebraska	12 months after death
New Jersey	8 months after death
Pennsylvania	9 months after death

In the 44 states with no inheritance tax: No inheritance tax return is required. Your inheritance is not reported as income on your federal or state income tax return (inheritances are NOT income).

"An inheritance is NOT income. You do not report it on your 1040. You do not pay federal income tax on it. The only taxes that apply are: inheritance tax (6 states), estate tax (12 states + DC + federal), and capital gains tax (if you sell inherited assets for more than their stepped-up basis)."

Reduce the Tax Burden — Plan Your Estate

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Inheritance Tax by State