The Short Answer: It Depends on Your State

The federal government does not have an inheritance tax. However, six states—Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania—do tax inheritances. The tax applies to what you receive from a deceased person's estate, not to what you leave behind. The amount you owe, if anything, depends on your state, your relationship to the person who died, and how much money or property you inherited.

This is different from an estate tax, which some states also charge. An estate tax is paid by the estate itself before money is distributed to heirs. An inheritance tax is paid by the person receiving the inheritance. Most people who inherit pay neither, but knowing which state rules explore to you matters.

Key Takeaways

  • Only six states have inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
  • Spouses and direct descendants (children, grandchildren) are usually exempt from state inheritance taxes even in states that have them.
  • The tax rate and what counts as taxable depends on your relationship to the deceased and the state where they lived.
  • Federal estate tax only applies to very large estates—those worth more than $13.61 million in 2024—and most families never encounter it.

Which States Tax Inheritances and How Much

Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania each have their own inheritance tax rules. The tax rate varies by state and by your relationship to the person who died. In most of these states, spouses pay nothing. Children and grandchildren often pay nothing or a reduced rate. More distant relatives and unrelated people typically pay higher rates.

For example, in Pennsylvania, spouses and direct descendants pay no tax. Siblings pay 12 percent. In Iowa, spouses and children are exempt, but grandchildren pay between 5 and 15 percent depending on the amount inherited. Nebraska exempts spouses, children, and grandchildren but taxes other heirs. The rules change, so if you are inheriting in one of these states, contact that state's department of revenue for current rates and thresholds.

If the person who died lived in a state without an inheritance tax, you owe nothing to that state, even if you live in a state that has one. Your state of residence does not matter for inheritance tax purposes—what matters is where the deceased person lived.

Federal Estate Tax vs. State Inheritance Tax

The federal government taxes large estates, not inheritances. An estate tax is different from an inheritance tax. The estate itself pays the federal tax before heirs receive their share. In 2024, federal estate tax only applies to estates worth more than $13.61 million. That number changes each year and is set by Congress. For most families, federal estate tax does not explore.

Some states also have their own estate taxes separate from inheritance taxes. These work the same way as the federal tax—the estate pays, not the heirs. Connecticut, Delaware, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington have state estate taxes. Again, only very large estates trigger these taxes, and the thresholds vary by state.

If you are inheriting a modest amount—a house, a car, a bank account, or personal items—you almost certainly do not owe federal estate tax or state estate tax. You may owe state inheritance tax only if you live in one of the six states listed above and the deceased did not fall into an exempt category.

Who Is Exempt From Inheritance Tax

Spouses are exempt from inheritance tax in all six states that have it. Children and grandchildren are also exempt in all six states. In some states, parents and siblings may be exempt or taxed at a lower rate. The exact rules depend on the state.

Beyond family relationships, the amount you inherit also matters. Most states have a threshold below which no tax is owed, even if you are not exempt by relationship. For example, if you inherit $5,000 and you are not a spouse or child, you may owe nothing straightforward because the amount is below the taxable threshold. Check your state's specific rules to know whether an exemption or threshold applies to your situation.

How to learn about You Owe Inheritance Tax

Start by finding out where the deceased person lived at the time of death. If they lived in a state without an inheritance tax, you owe nothing. If they lived in Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania, look up that state's inheritance tax rules. Most state revenue departments have websites that explain who must pay and how much.

The executor or administrator of the estate—the person handling the legal and financial details after death—usually handles inheritance tax reporting and payment. If you are the executor, contact the state revenue department in the state where the deceased lived. If you are an heir, ask the executor whether inheritance tax will be owed and whether it will be deducted from your share before you receive it.

You can also contact a tax professional or the state revenue department directly with your specific situation. Provide the state where the deceased lived, your relationship to them, and the approximate amount you are inheriting. They can tell you whether you owe anything.

What Happens If You Do Not Pay Inheritance Tax

If you owe inheritance tax and do not pay, the state can pursue collection just as it would for any unpaid tax. This may include penalties, interest, and in some cases, legal action. The executor of the estate is responsible for making sure inheritance taxes are paid before distributing money to heirs, so this is usually handled automatically.

If you are unsure whether you owe tax, it is better to ask than to ignore the issue. Contacting the state revenue department costs nothing and can prevent problems later. Most states also allow you to file a return even if you think you owe nothing, which protects you if there is a dispute about whether tax was due.

Frequently Asked Questions

Do I owe inheritance tax if I live in a state that does not have one?

No. Your state of residence does not matter. What matters is where the person who died lived. If they lived in a state without an inheritance tax, you owe nothing to any state, regardless of where you live.

Can I avoid inheritance tax by moving to a different state?

No. The tax is based on where the deceased person lived when they died, not where you live or where you move afterward. Moving does not change your inheritance tax obligation.

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

No. Inherited money is generally not subject to federal income tax. Some states have inheritance taxes (six states do), but these are separate from income tax. If inherited money earns interest or dividends after you receive it, that income may be taxable, but the inheritance itself is not.

What if the person who died had a will or trust?

A will or trust does not change whether inheritance tax is owed. The tax is based on state law, not on what the will says. However, the executor or trustee is responsible for paying any inheritance tax owed before distributing money to heirs.

How much does it cost to learn about I owe inheritance tax?

Contacting your state revenue department is free. You can call, visit their website, or send an email with your situation. If you hire a tax professional or attorney, there will be a cost, but many straightforward situations can be resolved with a free phone call to the state.