What inheritance tax costs depends on your state and how much you inherit

Inheritance tax is not a federal tax — the IRS does not charge it. Instead, six states have their own inheritance taxes, and they charge different rates depending on your relationship to the person who died and the size of what you inherit. If you live in Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania, you may owe inheritance tax on money or property you receive. If you live anywhere else, you do not.

The amount you pay varies by state. Some states tax you only if you inherit above a certain threshold — for example, New Jersey taxes inheritances over $25,000 but only for certain relatives. Other states use a sliding scale: the more you inherit, the higher your tax rate. Spouses and children are often taxed at lower rates than siblings or unrelated people, and some states exempt spouses entirely.

This is separate from estate tax, which is what the estate itself owes before your inheritance reaches you. Only a handful of states charge estate tax, and the federal government only charges it on very large estates (over $13.61 million in 2024, though this amount changes yearly). Most people do not deal with either one.

Key Takeaways

  • Only six states charge inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania; all other states do not.
  • Tax rates and thresholds vary by state and by your relationship to the person who died — spouses often pay nothing while distant relatives pay more.
  • You owe inheritance tax on what you receive, not on the estate itself, and you typically pay it within a set time after the death.
  • The executor of the estate usually handles reporting and payment, but you should confirm with your state's tax authority whether you personally owe anything.

Inheritance tax rates in each state that charges it

Iowa taxes inheritances at rates from 1% to 16%, depending on your relationship to the deceased and the amount inherited. Spouses and children under 21 are exempt. Siblings pay 10% to 15%, and unrelated people pay up to 18%.

Kentucky taxes inheritances at 4% to 16% for most beneficiaries, but spouses, children, and grandchildren are exempt. Siblings and more distant relatives pay the higher rates.

Maryland taxes inheritances at 10% for direct descendants (children, grandchildren) and spouses, and up to 16% for siblings and unrelated people. There is no threshold — even small inheritances are taxed, though the actual dollar amount owed may be small.

Nebraska taxes inheritances at 1% to 18%, with spouses and children exempt. The rate depends on the amount inherited and your relationship to the deceased.

New Jersey taxes inheritances over $25,000 at rates from 11% to 16% for most beneficiaries. Spouses, children, grandchildren, and parents are exempt entirely. Siblings and unrelated people pay the full rate.

Pennsylvania taxes inheritances at 4.5% for direct descendants, 12% for siblings, and 15% for unrelated people. Spouses are exempt. There is no minimum threshold — even small inheritances are taxed.

How the tax is calculated and who pays it

The executor of the estate — the person named in the will to handle the estate's affairs — is responsible for reporting the inheritance to the state and paying the tax. In most cases, the executor deducts the tax from the estate before distributing your share to you, so you do not write a check yourself. However, you should still understand what you owe in case questions arise later.

The calculation is straightforward: the state applies its tax rate to the amount you inherit, minus any exemptions or deductions your state allows. Some states allow deductions for funeral expenses or debts the deceased owed. The executor files an inheritance tax return with the state, usually within a set time frame — often 9 months after the death, though this varies by state.

If the executor does not pay the tax, the state can pursue you directly for payment. This is rare but can happen if the estate runs out of money or the executor is disorganized. If you are unsure whether the tax was paid, contact your state's revenue or tax department and ask for the status of the estate's return.

When you might owe nothing despite living in a tax state

Your relationship to the deceased matters as much as the amount you inherit. If you are the spouse of the person who died, you are exempt from inheritance tax in all six states that charge it. Children and grandchildren are exempt in Iowa, Kentucky, Nebraska, and New Jersey, though Maryland and Pennsylvania tax them at reduced rates (10% and 4.5%, respectively).

The size of the inheritance also matters. New Jersey does not tax inheritances under $25,000 for any beneficiary. Maryland and Pennsylvania tax all inheritances regardless of size, but if you inherit a small amount, the actual tax owed may be only a few dollars. Iowa, Kentucky, and Nebraska have no minimum threshold, so technically any inheritance is taxable, though again the amount owed on small inheritances is minimal.

If you are unsure whether you owe tax, contact the tax department in the state where the deceased lived. They can tell you based on your relationship and the amount you inherited.

Estate tax versus inheritance tax — what is the difference

Inheritance tax is what you owe on what you receive. Estate tax is what the estate itself owes before anything is distributed. The estate pays estate tax first, which reduces the amount available to distribute to heirs.

Only 12 states charge estate tax, and the thresholds are high — usually $5 million or more. The federal government charges estate tax only on estates over $13.61 million (in 2024; this threshold changes yearly). Most estates do not owe estate tax. If the estate does owe it, the executor pays it from the estate's assets before your inheritance reaches you.

A state can charge both inheritance tax and estate tax, or just one, or neither. For example, New Jersey charges both. Iowa charges only inheritance tax. Most states charge neither. If you inherit from someone who lived in a state with both taxes, the executor handles both payments — you do not need to do anything beyond receiving your inheritance.

What happens if the executor does not file or pay

If the executor fails to file an inheritance tax return or pay the tax owed, the state can pursue the beneficiaries — including you — for payment. The state may place a lien on property the deceased owned, or it may contact you directly for the amount owed plus penalties and interest. This is uncommon but can happen if the executor is inexperienced or the estate is in disarray.

If you suspect the executor has not filed, contact your state's revenue or tax department and ask whether a return has been filed for the estate. Provide the deceased's name, date of death, and Social Security number. The department can tell you the status and, if needed, what you owe personally. You may also want to consult a probate attorney if the executor is unresponsive, especially if the estate is large.

How to find out what you owe in your state

Start by identifying which state the deceased lived in when they died — that state's inheritance tax law applies, not the state where you live. Then contact that state's revenue, tax, or probate department. Most states have a website with inheritance tax forms and instructions. You can also call the department directly and provide the deceased's name and date of death; they can tell you whether an inheritance tax return has been filed and what you owe.

If the executor has already filed and paid, you may owe nothing. If the return has not been filed, ask the executor about the timeline. If the executor is unresponsive or deceased themselves, you may need to file the return yourself or hire a tax professional or attorney to do so. Do not ignore a notice from the state — penalties and interest accrue quickly.

Frequently Asked Questions

Do I have to pay inheritance tax if I live in a state that does not charge it?

No. Inheritance tax is charged by the state where the deceased lived, not where you live. If you inherit from someone who lived in a state with no inheritance tax, you owe nothing. If they lived in one of the six states that charge it, you may owe tax even if you live elsewhere.

Can I reduce what I owe by refusing the inheritance?

Yes, but it is complicated. If you formally disclaim (refuse) an inheritance within a set time frame — usually 9 months after the death — the inheritance passes to the next person in line and you owe no tax. However, you lose access to the money or property entirely. Consult a tax professional or attorney before disclaiming, as the decision has long-term consequences.

What if the executor paid the inheritance tax but I think it was calculated wrong?

Contact your state's revenue or tax department and ask to review the return. If you believe the tax was overpaid, you may be able to file a refund claim. If you believe it was underpaid, the state may contact you for the difference. A tax professional can help you understand whether the calculation was correct.

Is inheritance tax the same as income tax on inherited money?

No. Inheritance tax is a separate state tax on the transfer itself. Income tax does not explore to inherited money — you do not report it as income on your federal tax return. However, if the inherited money earns interest or dividends after you receive it, that income is taxable.

What if I inherit property instead of cash?

You still owe inheritance tax, but it is calculated based on the fair market value of the property at the time of death. The executor usually has the property appraised to determine its value. If you cannot pay the tax in cash, some states allow you to pay in installments or, in rare cases, to sell the property to cover the tax.