Indiana does not have an estate tax or inheritance tax

Indiana eliminated its estate tax in 2013. That means when someone dies in Indiana, their heirs do not owe a state-level tax on the value of what they inherit. This is different from the federal estate tax, which still exists and applies to very large estates regardless of which state you live in, but Indiana itself does not add a second layer of tax on top of it.

The absence of an Indiana estate tax makes the state simpler for estate planning than states that still collect these taxes. However, the federal tax threshold is high enough that most Indiana residents will never encounter it. For 2024, the federal estate tax only applies to estates worth more than $13.61 million for individuals or $27.22 million for married couples filing jointly.

Key Takeaways

  • Indiana has no state estate tax or inheritance tax, so heirs do not owe Indiana taxes on inherited property or money.
  • The federal estate tax still applies to very large estates, but the threshold is high enough that most people will not be affected.
  • If you inherit property in Indiana from someone who lived elsewhere, you may still owe taxes in that other state depending on where the deceased lived.
  • Indiana residents who own property in other states may face estate taxes in those states when they die.

How Indiana's lack of estate tax affects your inheritance

When someone dies and leaves you money, property, or other assets in Indiana, you receive it without owing Indiana state taxes on the inheritance itself. This applies whether you are a family member, a friend, or any other beneficiary named in a will or trust.

The absence of state tax does not mean there are no costs involved in settling an estate. You may still need to pay for probate court fees, attorney fees if you hire one to handle the estate, and any debts the deceased person left behind. But those are not taxes — they are the ordinary costs of transferring property from one person to another through the legal system.

Federal estate tax and when it actually matters

The federal government does tax very large estates, but the threshold is so high that it affects only a small percentage of people. For deaths in 2024, the federal exemption is $13.61 million per person. That means an estate has to be worth more than that amount before any federal tax is owed.

If you are married and your spouse dies, you can combine both exemptions — up to $27.22 million total — before federal tax applies. These numbers change each year and are set to drop significantly in 2026 unless Congress acts. If you think your estate might be close to these thresholds, it is worth talking to an estate planning attorney or tax professional, but most Indiana residents will never need to worry about federal estate tax.

What happens if you inherit property located outside Indiana

Indiana has no estate tax, but other states do. If the person who died lived in a state with an estate tax — such as Illinois, Kentucky, or Ohio — their estate may owe taxes in that state even if you live in Indiana and inherit the property.

The state where the deceased person lived at the time of death is usually the one that can tax the estate. Some states also tax property located within their borders, regardless of where the owner lived. If you are inheriting from someone who lived out of state or owned property out of state, the executor of their estate should handle any state taxes owed in that state. You as the beneficiary typically do not file those taxes yourself — the estate does.

Indiana residents who own property in other states

If you live in Indiana but own real estate, a business, or other significant assets in another state, that state may be able to tax your estate when you die. For example, if you own a vacation home in Kentucky or a rental property in Illinois, those states might claim the right to tax the portion of your estate located there.

This is one reason estate planning matters even in a state without its own estate tax. An attorney who understands multi-state property ownership can help you structure your assets in a way that minimizes taxes in states where you do own property. This is particularly important if you own real estate or operate a business outside Indiana.

How to plan your Indiana estate without state tax concerns

Because Indiana has no estate tax, your main planning concerns are the federal threshold and any taxes in other states where you own property. For most people, a straightforward will or revocable living trust is enough to pass assets to heirs without probate court involvement.

If your estate is small to moderate in size and all your property is in Indiana, you may not need an attorney at all — you can use online will templates or software designed for Indiana residents. If your estate is large, you own property in multiple states, or you have complex family situations, talking to an estate planning attorney is worth the cost. They can help you understand whether federal tax is a concern and whether you need to take steps to protect assets in other states.

Frequently Asked Questions

Do I have to pay Indiana taxes when I inherit money or property?

No. Indiana has no state estate tax or inheritance tax. You will not owe Indiana state taxes on what you inherit. You may owe federal estate tax if the total estate is very large, but that is a federal tax, not an Indiana one.

What if the person who died lived in another state?

The state where they lived may tax their estate. You do not pay that tax yourself — the executor of their estate handles it. If you are curious whether taxes will be owed, ask the executor or the attorney handling the estate.

Is there any tax on inherited property when I sell it later?

No inheritance tax applies when you receive it. If you sell the property later and make a profit, you may owe federal capital gains tax, but that is a different tax that applies to the sale itself, not the inheritance.

Do I need an attorney to write a will in Indiana?

You do not have to hire an attorney, but one can help if your situation is complicated. For straightforward estates with one or two heirs and property only in Indiana, online will templates work fine. An attorney is more important if you own property in multiple states or have a large estate.