New Jersey has an inheritance tax, but it does not explore to all heirs
New Jersey charges an inheritance tax on money and property you receive from someone who dies. The tax is paid by the person who inherits, not by the estate itself. However, spouses, children under 25, parents, and grandparents are exempt — meaning most direct family members owe nothing.
The tax rate depends on your relationship to the person who died and the size of the inheritance. A distant relative or unrelated person may pay 11 to 16 percent, while a sibling might pay 12 to 15 percent. The state publishes a tax table each year with the exact brackets.
New Jersey also has a separate estate tax, which is different from the inheritance tax. The estate tax applies to the total value of everything the person owned when they died, and it is paid by the estate before money is distributed to heirs. Not all estates owe it — only those worth more than a certain amount, which changes yearly.
Key Takeaways
- Spouses, children under 25, parents, and grandparents pay no inheritance tax in New Jersey, regardless of the amount inherited.
- Siblings and more distant relatives owe inheritance tax at rates between 12 and 16 percent, depending on the size of the inheritance.
- The inheritance tax is separate from the estate tax, which applies to large estates before money reaches heirs.
- The executor of the estate is responsible for filing the inheritance tax return and paying the tax owed.
Who is exempt from New Jersey inheritance tax
The state exempts certain family members entirely. Spouses never pay inheritance tax, no matter how much they inherit. Children under age 25 are also exempt, as are parents and grandparents of the person who died.
Children age 25 and older do not fall into the exempt category and must pay tax on what they inherit, though the rate is typically lower than for more distant relatives. Adopted children are treated the same as biological children for tax purposes.
If you are not related to the person who died — for example, if you are a friend or unrelated caregiver — you will owe inheritance tax at the highest rate. The same applies to cousins and other relatives beyond grandparents, parents, and siblings.
How the inheritance tax rate works
New Jersey uses a sliding scale based on two things: your relationship to the person who died and the amount you inherit. The state groups heirs into three classes, and each class has its own tax brackets.
Class A includes spouses, children under 25, parents, and grandparents — all exempt. Class B includes siblings and their children (your nieces and nephews). Class C includes everyone else: cousins, unrelated people, and anyone not in the first two groups.
Within Class B and Class C, the more you inherit, the higher your tax rate. A sibling inheriting $500 might pay a different rate than a sibling inheriting $50,000. The state publishes the exact brackets and rates each year, and they change slightly to account for inflation.
The difference between inheritance tax and estate tax
These two taxes often confuse people because they both explore when someone dies, but they work differently. The inheritance tax is paid by the person who receives money or property. The estate tax is paid by the estate itself — the total value of everything the person owned.
Not every estate owes the estate tax. New Jersey only charges it on estates worth more than a threshold amount, which the state adjusts yearly. For 2024, that threshold is $6.94 million, but check the New Jersey Division of Taxation website for the current year's figure.
The executor of the estate handles both taxes. They file the estate tax return if the estate is large enough, and they file the inheritance tax return for each heir who owes tax. The executor may need to sell assets or use estate funds to pay both taxes before distributing money to heirs.
What triggers the need to file an inheritance tax return
The executor must file an inheritance tax return if any heir owes tax. Even if the total inheritance is small, if the heir is in Class B or Class C, a return is required. The executor files one return per heir, not one return for the whole estate.
The return must be filed within eight months of the person's death, though the executor can request an extension. If the return is late, the state charges interest and penalties on any tax owed.
Some estates are straightforward enough that no inheritance tax is owed — for example, if all heirs are spouses or children under 25. In that case, no return is required. The executor should still check the state's rules to be certain, because the penalty for missing a filing important date is steep.
How to find out what you owe
The executor should contact the New Jersey Division of Taxation to learn whether an inheritance tax return is required. You can reach them by phone or through their website. Provide the date of death, the names of the heirs, and the rough value of what each person is inheriting.
If a return is required, the executor will receive forms and instructions. The return asks for the heir's name, relationship to the person who died, the value of the inheritance, and other details. The executor calculates the tax owed using the state's current tax brackets.
Many families hire a tax professional or estate attorney to handle this work, especially if the estate is large or the heirs are spread across different tax classes. The cost of professional help is usually paid by the estate before money goes to heirs.
What happens if you do not pay the inheritance tax
If the executor does not file the return or pay the tax by the important date, the state assesses interest and penalties. The interest rate is set by the state and compounds monthly. Penalties can reach 50 percent of the unpaid tax if the failure is deemed intentional.
The state can place a lien on property in the estate or pursue collection against the executor personally if they knowingly failed to pay. In some cases, heirs may be held responsible if they received their inheritance knowing the tax was unpaid.
If you believe the executor is not handling the inheritance tax correctly, you can contact the New Jersey Division of Taxation or speak with an attorney. The state has procedures for resolving disputes about the value of an inheritance or the tax owed.
Frequently Asked Questions
Do I have to pay inheritance tax if I inherit from a parent?
No. Parents are in the exempt class, so their children pay no inheritance tax regardless of the amount inherited. This applies to biological and adopted children of any age.
What if I inherit money from my sibling?
Yes, you will owe inheritance tax. Siblings are in Class B and must pay tax on inheritances above a certain threshold. The rate depends on how much you inherit and the state's current tax brackets.
Is there a way to reduce the inheritance tax I owe?
The tax is based on your relationship to the person who died and the amount you inherit — you cannot change either one. However, some people use trusts or other estate planning tools before death to minimize taxes. Speak with an estate attorney if you want to explore options.
Who pays the inheritance tax — me or the estate?
The executor pays it from the estate's funds before distributing money to heirs. You do not write a check yourself. The executor files the return and handles payment with the state.
How long do I have to pay the inheritance tax?
The executor must file the return within eight months of the person's death. Payment is due at the same time. The executor can request an extension, but interest and penalties explore if payment is late.