Texas has no state estate tax or inheritance tax

Texas does not charge an estate tax when someone dies and leaves money or property to heirs. It also does not charge an inheritance tax — a separate tax that some states collect from people who receive an inheritance. If you live in Texas or inherit property in Texas, you will not owe a state-level tax on that inheritance.

This is one of the clearest advantages Texas offers compared to states like New York, Massachusetts, and Oregon, which do tax estates or inheritances. However, federal taxes may still explore depending on the size of the estate, and you may owe taxes on income the inherited property generates after you receive it.

Key Takeaways

  • Texas charges no state estate tax or inheritance tax, regardless of how much money or property someone leaves behind.
  • The federal government may still tax very large estates (those over $13.61 million in 2024), but most Texas estates fall below this threshold.
  • You will owe income tax on money the inherited property earns after you receive it — for example, rent from inherited real estate or interest from inherited savings accounts.
  • If you inherit property from someone who lived in another state, that state's tax laws may still explore to that specific property.

Federal estate tax still applies to very large estates

Although Texas itself has no estate tax, the federal government does tax estates that exceed a certain size. In 2024, the federal threshold is $13.61 million per person. Estates smaller than this amount owe no federal estate tax. Estates larger than this amount owe federal tax on the amount above the threshold.

This threshold changes each year and is scheduled to drop significantly after 2025 unless Congress acts. Most Texas estates fall well below the current threshold, so federal estate tax is not a concern for the majority of families. A tax professional or estate attorney can tell you whether a specific estate will owe federal tax based on its total value.

Income tax on inherited property is separate from estate tax

Even though you will not owe estate tax or inheritance tax in Texas, you may owe income tax on money the inherited property produces after you receive it. For example, if you inherit rental property, you will owe income tax on the rent you collect. If you inherit a savings account or investment account, you will owe income tax on the interest or dividends it generates.

The inherited property itself — the house, the land, the money in the account — is not taxed as income. Only the earnings it produces after you own it are subject to income tax. This is an important distinction: inheriting $100,000 does not create a tax bill, but the interest that $100,000 earns in a savings account does.

Property inherited from out-of-state sources may face different rules

If you inherit property located in another state, that state's tax laws may explore to that property even though you live in Texas. For example, if you inherit real estate in New York, New York's estate tax rules may explore to that property. The state where the property is located, not where you live, determines which state's tax laws govern that specific asset.

If you inherit property from someone who lived in another state, check whether that state has an estate or inheritance tax. A few states — including New Jersey, Pennsylvania, Kentucky, Maryland, and Iowa — still collect inheritance tax from heirs. An estate attorney in that state can explain what you owe.

Capital gains tax applies when you sell inherited property

When you sell inherited property, you may owe federal capital gains tax on the profit. However, inherited property receives a stepped-up basis, which usually means you will owe little or no capital gains tax if you sell it soon after inheriting it.

Here is how it works: if someone bought a house for $200,000 and it was worth $400,000 when they died, the stepped-up basis sets your starting value at $400,000. If you sell it for $410,000 a few months later, you owe capital gains tax only on the $10,000 gain, not on the original $200,000 increase. This is a major tax advantage of inheriting property rather than receiving it as a gift during someone's lifetime.

Texas probate does not charge a probate tax

Texas does not charge a probate tax — a fee based on the size of the estate as it passes through the court system. Some states collect this tax as part of the probate process. Texas probate involves court fees and attorney fees, but these are not taxes and do not go to the state based on the estate's value.

The cost of probate in Texas depends on the complexity of the estate and the attorney's hourly rate or flat fee, not on a percentage of the estate's value. Many small or straightforward estates can avoid probate entirely by using a will, a trust, or other transfer methods that do not require court involvement.

Planning your estate in Texas

Because Texas has no state estate or inheritance tax, estate planning in Texas focuses on other goals: avoiding probate, naming guardians for minor children, controlling who receives what, and minimizing federal estate tax for very large estates. A will, a revocable living trust, or a combination of both can accomplish most of these goals.

If your estate is very large — over $13.61 million — a tax professional can suggest strategies to reduce federal estate tax. If your estate is smaller, the main benefit of planning is usually to avoid probate and make sure your wishes are carried out quickly and privately. An estate attorney in Texas can review your situation and recommend the right approach for your family.

Frequently Asked Questions

Do I owe Texas tax if I inherit money from someone who lived in another state?

No. Texas has no inheritance tax, so you will not owe Texas tax on any inheritance. However, if the person who died lived in a state with an inheritance tax — such as New Jersey or Pennsylvania — that state may try to collect tax from you. The state where the person lived at the time of death, not where you live, determines which state's inheritance tax rules explore.

What if the estate is worth more than $13.61 million?

The federal government will tax the amount above $13.61 million. The estate's executor or trustee is responsible for paying federal estate tax before distributing money to heirs. A tax professional or estate attorney should handle this calculation, as the rules are complex and mistakes can be costly.

Do I have to pay tax on money I inherit?

No. Receiving an inheritance is not a taxable event in Texas or under federal law. You will not owe tax straightforward because you inherited money. However, you will owe income tax on earnings the money generates after you receive it — such as interest on a savings account or dividends on investments.

Can I avoid probate in Texas without a lawyer?

Texas law allows some estates to pass to heirs without probate using a straightforward affidavit process, but the rules are specific and depend on the estate's size and structure. An attorney can review your situation and tell you whether probate is necessary. Many people use a revocable living trust to avoid probate entirely, which does require legal help to set up correctly.

What is a stepped-up basis and how does it help me?

A stepped-up basis resets the value of inherited property to its worth on the date of death. This means if you sell inherited property soon after inheriting it, you will owe capital gains tax only on any increase in value after that date, not on increases that happened before you inherited it. This can save you thousands in federal tax.