Texas does not have an inheritance tax
Texas has no state inheritance tax. When someone dies and leaves you money, property, or other assets, you will not owe Texas a tax on what you receive. This applies whether the person who died lived in Texas, owned property in Texas, or left their estate to you while living elsewhere.
The federal government does have an estate tax, but it only applies to very large estates. For 2024, the federal threshold is $13.61 million — meaning estates smaller than that owe nothing to the federal government. Most people inherit without owing any tax at all, state or federal.
Because Texas has no inheritance tax and no state income tax, it is one of the most tax-friendly states for people receiving inheritances. You keep what you inherit without a state tax bill.
Key Takeaways
- Texas does not tax inheritances at the state level, so you owe no tax to Texas on money or property you receive from someone's estate.
- The federal estate tax only applies to estates worth more than $13.61 million in 2024, so most inheritances are not subject to federal tax either.
- Even if the person who died lived in another state with an inheritance tax, you do not owe that state's tax on what you inherit in Texas.
- You may owe income tax on earnings from inherited assets going forward — for example, interest on inherited money or rent from inherited property — but not on the inheritance itself.
How the federal estate tax works, and who actually pays it
The federal estate tax is a tax on the total value of everything a person owned when they died. It is paid by the estate itself before money is distributed to heirs, not by the people who inherit.
The threshold changes each year. In 2024, estates worth $13.61 million or less owe no federal tax. Estates above that amount owe 40 percent tax on the excess. For example, an estate worth $15 million would owe 40 percent on $1.39 million — roughly $556,000.
After 2025, the threshold is scheduled to drop to around $7 million per person unless Congress changes the law. Even so, this affects only the wealthiest estates. The vast majority of people who inherit will never encounter a federal estate tax bill.
What you might owe tax on after you inherit
You do not owe tax on the inheritance itself, but you may owe tax on money the inherited assets earn going forward. This is income tax, not inheritance tax, and it applies to everyone — not just people in Texas.
If you inherit a savings account with $50,000 and it earns $500 in interest over the year, you owe income tax on that $500. If you inherit rental property and collect rent, you owe income tax on the rent. If you inherit stock and sell it for a profit, you owe capital gains tax on the profit.
Texas has no state income tax, so you will not owe Texas income tax on these earnings. You may owe federal income tax depending on the amount and type of income. The executor of the estate or your tax preparer can tell you what forms to file.
Inherited property and property tax in Texas
Inheriting property does not trigger a property tax bill in Texas. You inherit the property at its current assessed value, and your property tax going forward is based on that value — the same as if you had bought it.
If you inherit a house worth $300,000, you do not owe a one-time tax on that $300,000. You will owe annual property tax on the house based on the local tax rate, just as the previous owner did. Property tax is not an inheritance tax; it is an annual tax on property ownership.
If you inherit property in another state, that state's property tax rules explore to that property. Texas property tax rules explore only to property located in Texas.
Why other states have inheritance taxes and Texas does not
Twelve states and the District of Columbia have inheritance taxes. These states tax the person who inherits, not the estate. The tax rate and threshold vary by state and by the relationship between the person who died and the heir.
Texas chose not to impose an inheritance tax. Combined with no state income tax, this makes Texas attractive to people with significant assets. However, if you inherit from someone who lived in a state with an inheritance tax — such as Iowa, Kentucky, Maryland, New Jersey, or Pennsylvania — you may owe that state's tax on what you inherit, even if you live in Texas.
The state where the person who died lived, not where you live, determines whether an inheritance tax is owed. If your parent died in Pennsylvania and left you $100,000, you would owe Pennsylvania inheritance tax on that $100,000, even though you live in Texas and Texas has no such tax.
What happens if you inherit from someone in another state
The state where the person died determines whether an inheritance tax is owed. If they died in a state with an inheritance tax, their estate may owe that state tax before your share is distributed to you.
The executor of the estate — the person named in the will to handle the estate — is responsible for filing tax returns in any state where the person owned property or where they lived. If the estate owes tax in another state, the executor pays it from estate assets before distributing money to heirs.
You should ask the executor whether the estate is subject to any state inheritance taxes. If it is, the executor will handle the filing and payment. You do not file a separate inheritance tax return in Texas because Texas has no such tax.
Frequently Asked Questions
If I inherit money from someone who lived in another state, do I owe Texas tax?
No. Texas has no inheritance tax, so you owe nothing to Texas. You may owe tax to the state where the person died if that state has an inheritance tax. The executor of the estate handles that filing, not you.
Do I have to report an inheritance on my federal income tax return?
No. Inheritances are not reported as income on your federal tax return. However, if the inherited assets earn income — interest, dividends, rent — you must report that income. The executor may send you a form showing income earned by the estate before it was distributed to you.
What if I inherit a business or farm in Texas?
You do not owe an inheritance tax in Texas. You will owe property tax on any real estate the business or farm owns, and you may owe income tax on business income going forward. The executor can tell you what tax forms explore to your situation.
Is there a time limit to inherit money in Texas?
Texas law does not limit how long you can inherit. However, the executor of the estate must distribute assets within a reasonable time — usually one to three years depending on the complexity of the estate. Ask the executor for a timeline.
Do I owe tax if I inherit a house and sell it later?
You do not owe tax on the inheritance itself. If you sell the house for more than its value when you inherited it, you owe capital gains tax on the profit. Texas has no state capital gains tax, but the federal government may tax the gain depending on how much profit you made.