New Jersey does have an inheritance tax, but it does not explore to all heirs equally

New Jersey is one of only six states that still collects an inheritance tax—a tax on money or property you receive when someone dies. The tax is paid by the person who inherits, not by the estate itself. However, the amount you owe (if anything) depends entirely on who left you the money and how closely you were related to them.

The state divides heirs into four groups, called classes. Your class determines your tax rate and how much you can inherit tax-free. Spouses, parents, and children in the closest class pay nothing. More distant relatives and unrelated people may owe between 11 and 16 percent of what they inherit, though most people in New Jersey never pay because they fall into an exempt class.

Key Takeaways

  • New Jersey's inheritance tax applies only to heirs, not to the estate itself, and rates depend on your relationship to the person who died.
  • Spouses, children, parents, and grandparents pay zero inheritance tax on any amount they receive.
  • Siblings and more distant relatives face tax rates between 11 and 16 percent, with exemptions that vary by class.
  • The executor of the estate files the inheritance tax return with the New Jersey Division of Taxation, usually within eight months of death.

Who pays inheritance tax in New Jersey

The Class A heirs—spouses, children, parents, and grandparents—pay no inheritance tax on any amount. This is the largest group and covers most people who inherit in New Jersey.

Class B heirs are grandchildren, great-grandchildren, and siblings. They face a 12 percent tax rate but can inherit up to $25,000 tax-free. Anything above that amount is taxed at 12 percent.

Class C heirs include aunts, uncles, and cousins. They pay 13.5 percent on amounts over $500. Class D heirs are anyone else—friends, in-laws, and unrelated people. They pay 16 percent on amounts over $500.

The executor of the estate is responsible for determining which class each heir falls into and calculating what is owed. If you are unsure which class you belong to, the executor should tell you before the inheritance tax return is filed.

How the tax is calculated

The inheritance tax is calculated on the value of what you receive, not on the total estate. If an estate is worth $500,000 but is divided among five heirs, each heir's tax is based only on their individual share.

Certain types of property are exempt from the tax regardless of who inherits them. These include life insurance proceeds, money in retirement accounts like IRAs and 401(k)s, property held in joint tenancy with right of survivorship, and assets left to a surviving spouse. Charitable donations and property left to the state or federal government are also exempt.

The executor calculates the tax based on the fair market value of the property on the date of death. If the estate includes real estate, vehicles, or other assets that are hard to value, the executor may need to hire an appraiser. The inheritance tax return shows how this value was determined.

When the inheritance tax return must be filed

The executor must file the inheritance tax return with the New Jersey Division of Taxation within eight months of the person's death. This important date is firm—filing late can result in penalties and interest charges.

The return is filed on Form IT-R, the Inheritance Tax Return for Resident Decedents (or Form IT-NR for non-residents). The executor includes a copy of the death certificate, a list of all heirs and their relationship to the deceased, and documentation of the estate's value.

If the estate is small enough, the executor may not need to file a full return. New Jersey does not require an inheritance tax return if the total estate value is under a certain threshold and all heirs are in Class A (exempt). The executor should check with the Division of Taxation or an accountant to confirm whether a return is required.

What happens if you do not pay

If inheritance tax is owed and not paid by the important date, the Division of Taxation can place a lien on the property you inherited. This means the state has a legal claim against that property until the tax is paid. The lien can prevent you from selling the property or refinancing a mortgage on it.

Interest accrues on unpaid tax at a rate set by the state each quarter. Penalties for late payment can add 5 to 10 percent to the amount owed. If the tax remains unpaid for a long time, the state can pursue collection through wage garnishment or bank levies.

If you believe the tax calculation is wrong, you can file a protest with the Division of Taxation. You have 90 days from the date the tax is assessed to file. An accountant or tax attorney can help you determine whether a protest is worth pursuing.

Frequently Asked Questions

Do I have to pay inheritance tax if I inherit from someone who lived outside New Jersey?

Only if the person who died was a New Jersey resident at the time of death. If they lived in another state, that state's inheritance or estate tax laws explore instead. If they owned property in New Jersey but lived elsewhere, New Jersey may still tax the inheritance of that specific property.

What if I inherit a house with my sibling?

Each of you is taxed on your share of the house value. If the house is worth $400,000 and you each inherit half, you each owe tax on $200,000. As siblings (Class B), you would each have a $25,000 exemption, so the taxable amount would be $175,000 each at 12 percent.

Can I avoid inheritance tax by having the person put my name on their bank account before they die?

Not reliably. If you are added to an account solely to help manage it, the entire account value may still be subject to inheritance tax when the person dies. If you are added as a true joint owner with survivorship rights, that portion passes to you outside the estate and may avoid the tax—but this creates other legal and tax complications. Consult an estate attorney before adding names to accounts.

Is there a way to reduce what my heirs will owe?

Yes. Leaving money to a spouse or direct descendants (Class A) means they pay no tax. Leaving money to charity is also exempt. Some people use trusts or life insurance to pass money outside the estate, though these strategies have their own rules and costs. An estate attorney can explain which options fit your situation.

Who actually receives the inheritance tax payment—the state or the federal government?

The state of New Jersey receives the inheritance tax. It is a state tax, not a federal tax. The federal government has an estate tax, which is separate and applies only to very large estates (over $13.61 million in 2024, though this amount changes yearly).