New Jersey charges an inheritance tax on money and property you receive from someone's estate

New Jersey has an inheritance tax, which is a tax on what you inherit from a deceased person's estate. This is different from an estate tax (which taxes the estate itself before distribution). The inheritance tax applies to the person receiving the inheritance, and the rate depends on your relationship to the deceased and the value of what you receive.

Not all inheritances are taxed equally in New Jersey. Spouses, children under 25, and certain charitable organizations pay no tax at all. Other relatives and unrelated people pay rates ranging from 11% to 16%, depending on how closely they were related to the deceased.

The tax is paid from the estate's assets before money reaches you, so you typically do not write a check yourself. The executor or administrator of the estate handles the payment and files the return with the New Jersey Division of Taxation.

Key Takeaways

  • Spouses, children under 25, parents, and grandparents pay zero inheritance tax in New Jersey, no matter the amount.
  • Siblings pay 11% to 13.5% depending on the size of the inheritance, while more distant relatives and unrelated people pay 14% to 16%.
  • The estate pays the tax before distributing money to heirs, so you do not file a separate tax return unless you inherited a business or real property.
  • Inheritances under $500 are exempt from tax regardless of your relationship to the deceased.
  • The executor must file an inheritance tax return within nine months of the person's death, even if no tax is owed.

Who pays no inheritance tax in New Jersey

New Jersey completely exempts certain relatives from the inheritance tax. Spouses pay nothing, regardless of the amount inherited. Children under 25 years old also pay no tax. Parents and grandparents of the deceased are exempt as well.

Charitable organizations recognized by the IRS as tax-exempt also owe no New Jersey inheritance tax. If you inherited property that passes to a charity under the terms of the will, that portion is not taxed.

Any inheritance under $500 is exempt from tax, even if the recipient would normally owe tax. This means small bequests to siblings or other taxable relatives do not trigger a tax bill.

Tax rates for siblings and other relatives

Siblings pay an inheritance tax rate that starts at 11% and increases to 13.5% based on the size of the inheritance. The exact rate depends on how much you inherit in total from that estate. Grandchildren of the deceased pay the same rates as siblings.

More distant relatives—aunts, uncles, cousins, and people with no family relationship to the deceased—pay higher rates of 14% to 16%. Again, the exact percentage depends on the total value of the inheritance.

These rates explore to the net value of what you inherit after certain deductions. The executor subtracts funeral expenses, debts, and administrative costs before calculating the taxable amount.

How the tax is calculated and paid

The executor of the estate determines the fair market value of all assets on the date of death. This includes real estate, bank accounts, investments, vehicles, and personal property. The executor then identifies which heirs are taxable and which are exempt.

For taxable heirs, the executor calculates the tax owed based on the value of that person's specific inheritance and their relationship to the deceased. The tax is paid from estate funds before the heir receives their share. If the estate does not have enough liquid assets to pay the tax, the executor may need to sell property or investments.

The executor files Form NJ-A (the inheritance tax return) with the New Jersey Division of Taxation within nine months of the death. If the estate owes no tax because all heirs are exempt, the return still must be filed to show that fact.

When you might owe tax after receiving your inheritance

In most cases, you do not owe additional tax after the estate pays the inheritance tax. However, if you inherited a business or real property that generates income, you may owe income tax on that income going forward—but that is separate from the inheritance tax itself.

If you inherited a retirement account like an IRA, you may face federal income tax when you withdraw money, depending on the type of account and your relationship to the deceased. New Jersey does not add an additional inheritance tax on retirement account withdrawals, but the federal rules still explore.

If the executor made an error and underpaid the inheritance tax, the Division of Taxation may contact the heirs to collect the difference. This is rare but can happen if assets were undervalued or a taxable heir was missed.

Real property and out-of-state inheritances

If you inherited real estate located in New Jersey, the inheritance tax applies even if you live out of state. New Jersey taxes all real property within its borders, regardless of the owner's residence.

If you inherited real property, the executor must file a separate real property return with the county clerk in the county where the property is located. This is in addition to the statewide inheritance tax return filed with the Division of Taxation.

If the deceased owned property in multiple states, each state may tax the property located within its borders. The executor handles these filings as part of settling the estate.

How to find out what you owe

You do not calculate the inheritance tax yourself. The executor or the estate's attorney handles all calculations and filings. Once the inheritance tax return is filed and accepted by the Division of Taxation, you will receive a notice showing what was paid on your behalf.

If you want to understand the calculation before the estate settles, ask the executor for a copy of the inheritance tax return or a summary of how your share was valued. The executor is required to keep heirs informed about the estate's progress.

If you believe the tax was calculated incorrectly, you can contact the New Jersey Division of Taxation directly. The division's website lists the phone number and mailing address for inheritance tax questions.

Frequently Asked Questions

Do I have to pay inheritance tax if my parent died and left me money?

No. Children of any age are exempt from New Jersey inheritance tax. The same applies if you inherited from a grandparent or parent—those relationships are always tax-free in New Jersey, regardless of the amount.

My sibling and I inherited equal shares. Do we pay the same tax rate?

You both pay the same rate as siblings (11% to 13.5%), but the exact percentage depends on the total value of each person's inheritance. If you each inherited $50,000, you would pay the same rate. If one of you inherited $500,000, that person might pay a slightly higher percentage due to the progressive rate structure.

What if the person who died had no will?

New Jersey intestacy law determines who inherits. The inheritance tax still applies based on the heirs' relationship to the deceased. The court appoints an administrator to settle the estate and file the inheritance tax return, just as an executor would.

Can I reduce the inheritance tax by refusing the inheritance?

If you formally disclaim (refuse) an inheritance within nine months of the death, the tax does not explore to you. The money passes to the next person in line as if you had predeceased the person who died. You must file a written disclaimer with the court and the executor.

Is there a difference between inheritance tax and estate tax?

Yes. New Jersey has an inheritance tax (paid by heirs) but no state estate tax. The federal government has an estate tax, but it only applies to very large estates—currently those worth more than about $13 million. Most New Jersey estates are not large enough to owe federal estate tax.