How Inheritance Tax Works in 2026 by State
Quick answer
Five U.S. states tax inheritances (Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania) — Iowa repealed its inheritance tax for deaths on or after 1 January 2025. Most Americans pay zero inheritance tax. Federal estate tax applies only to estates over $15 million (2026; married couples: $30 million with portability), so more than 99.8% of estates are exempt. Separately, 12 states and DC levy their own estate tax on estates over roughly $1–$15 million. Your state determines most of the tax burden; your estate size determines federal exposure.
Correction notice (updated 30 July 2026). Earlier versions of this page gave the federal exemption as $13.61 million and said it would sunset to about $7 million, and advised locking in the exemption before it fell. The sunset was cancelled by the One Big Beautiful Bill Act (P.L. 119-21, signed 4 July 2025), which set the exemption at $15,000,000 permanently. The same versions listed Iowa, Delaware, New Jersey and New Hampshire as levying death taxes that were repealed years ago, and listed four states that do levy an estate tax — Hawaii, Oregon, Vermont and Washington — as having none. The state figures below have been re-verified for 2026.
Federal Estate Tax (2026 Exemption)
The federal government taxes large estates.
2026 exemption:
- Single person: $15 million
- Married couple: $30 million (with a portability election)
Tax rate: 40% on amounts exceeding the exemption
In practice:
- More than 99.8% of American estates are below $15 million → Pay $0 federal estate tax
- Only estates above $15M pay 40% federal tax on the excess
- Example: a $20M estate pays 40% × ($20M – $15M) = 40% × $5M = $2,000,000 federal tax
Historical note: the exemption was $12.92M in 2023, $13.61M in 2024 and $13.99M in 2025. OBBBA raised it to $15,000,000 for 2026 and made it permanent, with inflation indexing from 2027 (Rev. Proc. 2025-32, §.41).
Legislative note: the doubled TCJA exemption was written to expire for transfers after 31 December 2025, which is why so much 2018–2025 planning content urges readers to use it before it disappeared. Congress removed that expiry in July 2025. There is no scheduled decrease to plan against.
State Inheritance Taxes (5 States)
Five states tax the beneficiaries on what they inherit. Rates depend on how closely the heir was related to the deceased.
| State | Tax Rate | Exemptions | Who Pays | Notes |
|---|---|---|---|---|
| Kentucky | 0–16% | Spouse, children, parents, siblings exempt; $1,000 for distant heirs | Beneficiary | From 1 Jan 2026 Class B beneficiaries (nieces, nephews, in-laws) are also exempt |
| Maryland | Flat 10% | Spouse, children, parents, siblings exempt; no tax if the estate is under $50,000 | Beneficiary | The only state with both an estate and an inheritance tax |
| Nebraska | 0–15% | Up to $100,000 depending on class | Beneficiary | Assessed at county level |
| New Jersey | 0–16% | Spouse, children, grandchildren, parents exempt; $25,000 for Class C (siblings, sons/daughters-in-law) | Beneficiary | Class D (everyone else) taxed from the first dollar |
| Pennsylvania | 0–15% | Spouse 0%; lineal descendants 4.5%; siblings 12%; others 15% | Beneficiary | No exemption amount — the rate applies from the first dollar |
Repealed: Iowa phased out its inheritance tax and eliminated it entirely for deaths on or after 1 January 2025. If you are reading an article that still lists Iowa, it predates the repeal.
How inheritance tax works:
Assume your parent dies in Pennsylvania and leaves you $100,000. As a lineal descendant you pay the 4.5% rate from the first dollar:
$100,000 × 4.5% = $4,500
You receive: $95,500
A friend inheriting the same $100,000 would pay 15%, or $15,000.
Key insight: in these 5 states, spouses and (in four of the five) children are exempt or heavily favoured. Distant relatives and non-relatives pay the highest rates. Pennsylvania is the outlier in taxing children at all.
State Estate Taxes (12 States + DC)
Separate from inheritance tax, some states also tax estates (like the federal tax does).
| Jurisdiction | 2026 exemption | Rate range |
|---|---|---|
| Connecticut | $15,000,000 (tied to the federal amount) | 12% flat |
| Hawaii | $5,490,000 | 10%–20% |
| Illinois | $4,000,000 | 0.8%–16% |
| Maine | $7,160,000 (indexed) | 8%–12% |
| Maryland | $5,000,000 | 0.8%–16% |
| Massachusetts | $2,000,000 | 0.8%–16% |
| Minnesota | $3,000,000 | 13%–16% |
| New York | $7,350,000 (indexed) | 3.06%–16% |
| Oregon | $1,000,000 | 10%–16% |
| Rhode Island | $1,838,056 (indexed) | 0.8%–16% |
| Vermont | $5,000,000 | 16% flat |
| Washington | $3,076,000 for deaths before 1 July 2026; $3,000,000 after | 10%–35% |
| District of Columbia | Indexed annually — confirm the current figure with the DC Office of Tax and Revenue | 11.2%–16% |
Repealed, and still widely miscited: Delaware repealed its estate tax effective 1 January 2018. New Jersey finished phasing out its estate tax at the same time and now levies only an inheritance tax. New Hampshire repealed its legacy and succession tax (RSA 86) for deaths on or after 1 January 2003, and its estate tax (RSA 87) was a "pick-up" tax that simply collected the federal state death tax credit — when Congress phased that credit out, New Hampshire stopped requiring the return for deaths on or after 1 January 2005. The statute is still on the books but collects nothing.
How estate tax works:
Assume you die in Massachusetts with a $3M estate.
Federal estate tax:
$3M estate < $15M exemption = $0 federal tax
Massachusetts estate tax:
$3M estate > $2M exemption → Massachusetts estate tax is due
The amount is not simply 16% of the excess. Massachusetts computes the tax from a graduated table running from 0.8% to 16%, then applies a credit that shelters the first $2 million. A $3M estate lands in the low single-digit percentages of the taxable amount, not 16%. Use the Massachusetts Department of Revenue's own table, or a Massachusetts-specific calculator — a flat top-rate estimate overstates the bill several times over. The same caution applies to every state in the table above: the upper figure is a top marginal rate, not a flat rate on the excess.
Who Actually Pays Inheritance/Estate Tax?
Estate tax example (high-net-worth): You die with $5M estate in New York (state estate tax state).
State estate tax:
$5M – $7.35M exemption = No state tax (under exemption)
Federal: $5M < $15M exemption = No federal tax
Total tax: $0
You need $5M+ to worry about NY state estate tax.
Inheritance tax example (any amount can trigger): You die in Pennsylvania with $200,000 leaving $50,000 to a friend.
PA inheritance tax:
Friend gets $50,000 bequest
PA rate for non-relative: 15%
Tax owed: $50,000 × 15% = $7,500
Friend receives: $42,500
Even modest inheritances can trigger tax in PA.
Planning Strategies to Minimize Taxes
Strategy 1: Move to a No-Tax State
If you live in Massachusetts ($2M exemption, graduated 0.8%–16% schedule) and have $5M, moving to Florida (no estate tax) eliminates the Massachusetts bill entirely:
MA estate tax on a $5M estate: mid-six figures, per the state's graduated table
FL estate tax: $0
Do not estimate this as (estate − exemption) × 16%. That formula treats a graduated schedule as flat and produces a number several times too large. Get the figure from the Massachusetts Department of Revenue table before making a decision on it.
Action: If you have significant assets and live in high-tax state, consider moving (requires establishing residency, usually 6 months+).
Strategy 2: Gift During Lifetime
Annual gift tax exclusion (2026): $19,000 per recipient per year tax-free.
Married couple can gift: $38,000/year to each child tax-free
Over 30 years: $1,140,000 removed from taxable estate
If the estate would otherwise be taxed at 40%: saves $456,000
(Held flat at $19,000; the exclusion is indexed, so the real total would be higher. And note the condition — this only saves federal tax if the estate exceeds $15M, though it can still save state estate tax at much lower levels.)
Action: Make annual gifts to children, grandchildren to reduce estate size.
Strategy 3: Irrevocable Life Insurance Trust (ILIT)
Removes life insurance proceeds (often $1M+) from taxable estate.
Regular insurance: You own $1M policy
At death: $1M counts toward your $15M exemption
You lose $400,000 of exemption tax-free threshold
With ILIT: Trust owns $1M policy
At death: $1M doesn't count toward exemption
You keep full exemption, policy pays tax-free to trust
Saves: $1M × 40% = $400,000 in potential taxes
Strategy 4: Charitable Donations
Donating to charity removes assets from taxable estate.
You have $6M, want to leave $4M to kids, $2M to charity
Donate $2M to charity during lifetime:
- Tax deduction saves: $2M × 37% (top bracket) = $740,000
- Estate shrinks to $4M (below exemption if married)
- Estate tax on $4M: $0
Strategy 5: Dynasty Trust (for very wealthy)
Complex structure that passes wealth across generations while minimizing tax.
Most people don't need this (requires $10M+).
Your State: Quick Reference
Estate tax only (11 states + DC): Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia
Inheritance tax only (4 states): Kentucky, Nebraska, New Jersey, Pennsylvania
Both: Maryland — the only state that levies an estate tax and an inheritance tax
No inheritance or estate tax (34 states): Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, Wyoming.
Iowa joined that list on 1 January 2025, when its inheritance tax ended.
Note that Hawaii, Oregon, Vermont and Washington all levy estate taxes despite being listed as tax-free states in older versions of this article, and Delaware, New Hampshire and New Jersey no longer levy one despite frequently appearing on such lists.
Planning if You Live in a Tax State
If you live in Pennsylvania (inheritance tax state):
- Leaving money to a spouse? No tax
- Leaving to children or grandchildren? 4.5% — Pennsylvania is the one state that does tax lineal descendants
- Leaving to a sibling? 12%
- Leaving to a friend or more distant relative? 15%
If you live in Massachusetts (estate tax state):
- Estate over $2M? Your estate pays state tax (not the beneficiary)
- The tax is computed from a graduated 0.8%–16% table with a credit sheltering the first $2M, not as a flat percentage of the excess — check the Department of Revenue table for your figure
If you live in New York (estate tax state — New York has no inheritance tax):
- The 2026 exemption is $7,350,000, and a cliff at 105% of that ($7,717,500) removes the exemption entirely for estates above it
- Consider FL, TX or NV (no state estate tax) — but domicile is a facts-and-circumstances test, not a form you file
SECURE Act Impact (2023+) on Inheritance
The SECURE Act (Secure Every Community's Retirement Enhancement Act) changed tax rules for inheriting retirement accounts:
Old rule: Beneficiaries could stretch IRA withdrawals over their lifetime (tax benefit for decades)
New rule (2023+): Most non-spouse beneficiaries must withdraw all inherited IRA funds within 10 years
Impact:
- Inherited $500,000 IRA now triggers large tax bill within 10 years
- Instead of paying taxes gradually over 30+ years
- High-net-worth estates now owe more income tax
Planning:
- High-net-worth individuals should review beneficiary designations
- Consider Roth conversions (pay tax now, tax-free growth after)
- Consider trusts as beneficiary for better planning
- Consult tax attorney if assets >$1M
Real-World Example: Tax Impact by State
Scenario: Person with a $4M estate dies, leaving everything to adult children.
Federal, everywhere: $0. A $4M estate is far below the $15M exemption. The federal tax is simply not in play at this level — which is exactly why the state answer matters so much.
| Where you were domiciled | 2026 exemption | Is state estate tax due on $4M? |
|---|---|---|
| Florida, Texas, Nevada, Arizona (and 30 others) | none | No — no state estate tax at all |
| Connecticut | $15,000,000 | No — Connecticut tracks the federal amount |
| New York | $7,350,000 | No — under the threshold |
| Maine | $7,160,000 | No |
| Hawaii | $5,490,000 | No |
| Maryland, Vermont | $5,000,000 | No |
| Illinois | $4,000,000 | At the line — $4M is exactly the exemption |
| Washington | $3,076,000 / $3,000,000 | Yes |
| Minnesota | $3,000,000 | Yes |
| Massachusetts | $2,000,000 | Yes |
| Rhode Island | $1,838,056 | Yes |
| Oregon | $1,000,000 | Yes, on the largest excess of any state |
The same $4M estate produces a state tax bill in six states and nothing in the rest. That is the whole point of this page: for the overwhelming majority of families who will ever face a death tax, it is a state tax, and the federal figure — whatever Congress does to it — is irrelevant to them.
We deliberately do not publish a dollar figure for each state here. Every one of these states uses a graduated schedule, several have credits and cliffs layered on top, and a "(estate − exemption) × top rate" shortcut overstates the answer badly. Get the number from your state's revenue department or a state-specific calculator.
Should You Move for Tax Purposes?
Consider it, if:
- Your estate exceeds your state's exemption by a meaningful margin
- You live in a low-exemption state — Oregon ($1M), Rhode Island (~$1.84M), Massachusetts ($2M), Minnesota ($3M) or Washington ($3M)
- You're retired or semi-retired and can genuinely change domicile
Considerations:
- Cost to move: $10,000–$30,000
- Savings: Often $200,000–$500,000+
- ROI: Usually positive if assets >$3M
- Timeline: Establish residency before death (ideally 1+ year)
Popular low-tax destinations:
- Florida (no income/inheritance/estate tax)
- Texas (no income/inheritance/estate tax)
- Nevada (no income/inheritance/estate tax)
- Wyoming (no income/inheritance/estate tax)
Your Inheritance Tax Checklist
- Identify your state(s) (residence, property locations)
- Check if your state has inheritance tax
- Check if your state has estate tax
- Calculate your estate value
- If >exemption, consult tax attorney
- Consider gifting strategy if assets >$5M
- Update beneficiaries to reflect tax planning
- If retired/semi-retired and assets >$5M, consider moving to low-tax state
Sources
- Rev. Proc. 2025-32 — §.41 (2026 basic exclusion amount, $15,000,000, indexed from CY2027); §.42 (2026 annual exclusion for gifts, $19,000)
- One Big Beautiful Bill Act, Public Law 119-21 — signed 4 July 2025; amended IRC §2010(c)(3)
- IRS: Estate and gift taxes
- Tax Foundation: Estate and Inheritance Taxes by State — state exemptions, rate schedules, and repeal history (Iowa 2025, Delaware and New Jersey 2018)
- State revenue departments for each jurisdiction's own rate table — the graduated schedules are not reproduced here on purpose