Twelve states and Washington, D.C. charge estate tax on the property you leave behind

Estate tax is a tax on the total value of everything a person owns when they die — their house, bank accounts, investments, and personal property. Twelve states plus Washington, D.C. collect this tax. The other 38 states do not. The federal government also has an estate tax, but it only applies to estates worth more than a certain amount (which changes yearly and is currently very high). State estate taxes kick in at much lower thresholds, which is why they matter more for most people.

The states that have estate tax are Massachusetts, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington, D.C. Each one sets its own tax rate, starting point, and rules. If you own property in a state with estate tax or you live in one, your heirs may owe money when you die.

Key Takeaways

  • Twelve states and Washington, D.C. have estate tax; the other 38 states do not.
  • Estate tax rates range from 3.6% to 16% depending on the state and the size of the estate.
  • Each state sets its own threshold — the amount of money an estate must be worth before tax kicks in — and thresholds vary from $275,000 to $5.93 million.
  • If you die owning property in a state with estate tax, your executor or heirs will need to file a state estate tax return and may owe money from the estate.

Estate tax rates and thresholds by state

The states with estate tax do not all charge the same amount. Massachusetts and Oregon have the lowest starting threshold at $1 million — meaning estates worth more than $1 million owe tax. Delaware, Illinois, and Kentucky start at $2 million. Connecticut, Iowa, Maine, Maryland, Minnesota, New York, Rhode Island, and Vermont range from $2.7 million to $5.93 million. Washington, D.C. starts at $5.93 million.

Tax rates also differ. Oregon charges 3.6% on the lowest bracket and goes up to 16%. New York starts at 3.06% and reaches 16%. Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Minnesota, Rhode Island, and Vermont all have their own rate schedules. Washington, D.C. charges between 3.6% and 16%. The higher the estate value, the higher the percentage owed.

Because thresholds and rates change, you should check your state's tax department website for the current numbers if you live in or own property in one of these states. Thresholds sometimes increase yearly, and rates can shift with new laws.

How estate tax works when someone dies

When a person dies, their executor (the person named in the will to handle the estate) or their heirs must figure out what the total estate is worth. This includes real estate, bank accounts, stocks, retirement accounts, life insurance payouts, and anything else of value. If that total exceeds the state's threshold, the executor files a state estate tax return.

The executor then calculates the tax owed based on the state's rate schedule and pays it from the estate's money before distributing anything to heirs. This means heirs may receive less than they would have if there were no estate tax. The process usually takes several months because the executor has to gather documents, value assets, and sometimes wait for the state to review the return.

Some states allow deductions or credits that lower the tax. For example, many states let you deduct debts the person owed, funeral costs, and sometimes charitable donations. A few states have a marital deduction, meaning property left to a surviving spouse does not count toward the threshold. The rules vary by state.

States with no estate tax

Thirty-eight states have no estate tax at all. These states are Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and South Carolina.

If you live in one of these states or own property only in these states, you will not owe state estate tax when you die, no matter how large your estate is. You may still owe federal estate tax if your estate is very large, but that is a separate matter and the threshold is much higher than state thresholds.

What happens if you own property in multiple states

If you own real estate in more than one state, the state where the property is located can tax it. For example, if you live in Florida (no estate tax) but own a rental house in New York (which has estate tax), New York can tax that house when you die. Your executor will need to file returns in each state where you owned property and where estate tax applies.

Your main residence is usually taxed by the state where you legally lived (your domicile). But vacation homes, rental properties, and business property are taxed by the state where they sit. This can get complicated, which is why people who own property across state lines sometimes work with an accountant or attorney to plan ahead.

Planning ahead to reduce estate tax

If you live in a state with estate tax or own property in one, you have options to reduce what your heirs will owe. One common approach is to give money or property to family members while you are alive, up to a certain amount each year. Many states let you give away a set amount per person per year without it counting toward your estate. Another option is to put property in a trust, which can sometimes shield it from estate tax depending on how the trust is set up.

Charitable donations can also lower your taxable estate. If you leave money to a may have access to charity, that amount does not count toward the threshold. Some people use life insurance to cover the estate tax bill, so heirs do not have to sell property or assets to pay it. These strategies work differently in each state, so it is worth talking to a tax professional or estate attorney if your estate might be large enough to owe tax.

Federal estate tax versus state estate tax

The federal government also charges estate tax, but only on very large estates. As of 2024, the federal threshold is $13.61 million per person (this number changes yearly). Most people never hit this threshold. State estate taxes are the bigger concern for middle-class and upper-middle-class families because state thresholds are much lower — as low as $1 million in some states.

You can owe both state and federal estate tax on the same estate if it is large enough. However, the federal government allows a credit for state estate taxes paid, which means you do not pay the full amount twice. Still, the combined effect can be significant. If you think your estate might be large enough to trigger either tax, it is worth reviewing your situation with a professional.

Frequently Asked Questions

Do I owe estate tax if I live in a state without it but own property in a state that has it?

Yes, the state where the property is located can tax it. If you live in Texas but own a vacation home in Connecticut, Connecticut can tax that home when you die. You would file an estate tax return in Connecticut even though you do not live there. Your main residence is usually only taxed by your home state.

Can I avoid estate tax by moving to a state without it?

You can reduce future estate tax by moving to a state without it, but the timing matters. Most states look at where you lived when you died, not where you lived your whole life. If you move and establish a new legal residence (domicile) before you die, your main estate will be taxed by your new state. However, property you already own in a state with estate tax will still be taxed by that state.

What is the difference between estate tax and inheritance tax?

Estate tax is paid by the estate itself before heirs receive anything. Inheritance tax is paid by the heirs on what they receive. Six states have inheritance tax instead of or in addition to estate tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. The rules and rates are different from estate tax.

How long do executors have to pay estate tax?

Most states require the estate tax return to be filed within nine months of the person's death, though extensions are sometimes possible. The tax itself is usually due at the same time. If the estate does not have enough liquid money to pay when ready, the executor may be able to request a payment plan or extension, depending on the state.

Does a surviving spouse have to pay estate tax on property left to them?

It depends on the state. Many states with estate tax allow a marital deduction, meaning property left to a surviving spouse does not count toward the taxable estate. However, not all states have this deduction, and the rules vary. Check your state's tax department website or speak with an estate attorney to understand how your state handles this.