Inheritance tax is a state tax, not a federal one, and only a handful of states charge it

The United States does not have a federal inheritance tax. Instead, six states—Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania—charge an inheritance tax on money or property you receive from someone who has died. The tax is paid by the person who inherits (you), not by the estate itself. Whether you owe anything depends on which state the person who died lived in, which state you live in, and your relationship to them.

If the person who died lived in a state with no inheritance tax, you owe nothing to that state, even if you live in one that does. If they lived in one of the six states listed above, you may owe tax—but most states exempt close relatives like spouses, children, and parents. The tax rate and exemptions vary significantly by state and by how closely you were related to the person who died.

Key Takeaways

  • Only Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania charge inheritance tax; the other 44 states do not.
  • Inheritance tax is owed only if the person who died lived in one of those six states, regardless of where you live.
  • Spouses are exempt from inheritance tax in all six states; children and parents are exempt in most of them.
  • The tax is calculated on the value of what you inherit, and rates range from 1% to 16% depending on the state and your relationship to the deceased.
  • The person handling the estate (the executor) is usually responsible for filing the inheritance tax return and paying the tax.

Which states have inheritance tax and who is exempt

The six states that charge inheritance tax each have different rules about who pays and how much. In all six states, a surviving spouse pays zero tax on everything they inherit. Children are exempt in Iowa, Kentucky, Maryland, and Pennsylvania, but not in Nebraska or New Jersey. Parents are exempt in Iowa, Kentucky, and Maryland, but not in the other three states. Grandchildren, siblings, and more distant relatives face higher tax rates or no exemption at all.

If you inherited from someone who died in one of these states, the executor of the estate will determine whether you owe tax based on your relationship to the deceased and the value of what you received. The executor is the person named in the will or appointed by the court to settle the estate. They handle filing the inheritance tax return with the state.

How inheritance tax is calculated and what the rates are

Inheritance tax is calculated on the net value of what you inherit—meaning the value after debts, funeral expenses, and estate administration costs are subtracted. Each state sets its own tax brackets and rates. In Iowa, the top rate is 16% for distant relatives. In Kentucky, it ranges from 4% to 16%. In Maryland, it is 10% for most non-exempt heirs. In Nebraska, it is 1% to 18%. In New Jersey, it is 11% to 16%. In Pennsylvania, it is 4.5% to 15%.

Most states also set a threshold—an amount below which you owe no tax. For example, in Pennsylvania, if you inherit less than $3,500 from a non-exempt person, you owe nothing. These thresholds and rates change periodically, so the executor should check the current rules with the state tax authority when the estate is being settled.

When the tax is due and who pays it

The inheritance tax return is typically due within nine months of the person's death, though the exact important date varies by state. In most cases, the executor files the return and pays the tax from the estate's assets before distributing money or property to the heirs. This means you may receive less than the full value of your inheritance because the tax comes out first.

If the executor does not pay the tax, the state can pursue the heirs directly for payment. Some states allow heirs to pay their own share of the tax instead of having the executor pay it from the estate, but this is not common. You should ask the executor or an estate attorney whether you will owe tax on your inheritance and when payment is expected.

The difference between inheritance tax and estate tax

Inheritance tax and estate tax are often confused because they both explore to money and property after someone dies. Inheritance tax is paid by the person who inherits and is charged by six states. Estate tax is different: it is paid by the estate itself (not by individual heirs) and is charged by only a few states—Connecticut, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. The federal government does not charge estate tax on most estates; the federal estate tax applies only to very large estates (over $13.61 million in 2024, though this threshold changes yearly).

If someone dies in a state with both inheritance tax and estate tax, both may explore. The executor will need to file returns for both. However, most people will deal with neither, because they live in states that charge neither tax.

What happens if you do not pay inheritance tax

If you owe inheritance tax and do not pay it, the state tax authority can place a lien on property you inherited or pursue other collection methods. Interest and penalties accrue over time, making the debt larger. The best course is to work with the executor or an estate attorney to understand what you owe and when payment is due.

If you believe you should not owe tax—for example, because you were exempt as a spouse or child—you can file a claim with the state tax authority or work with a tax professional to dispute the assessment. Each state has a process for appeals, though the time window to file is limited.

When to talk to a tax professional or attorney

If the person who died lived in one of the six inheritance tax states and left you a significant inheritance, it is worth consulting a tax professional or estate attorney. They can tell you exactly what you owe, when it is due, and whether any exemptions explore to you. This is especially important if the estate is complex, includes business interests, or spans multiple states.

If you are the executor and responsible for filing the inheritance tax return, an attorney or tax professional can guide you through the process and help you avoid mistakes that could result in penalties. Many executors hire professional help specifically to handle tax filings, and the cost usually comes out of the estate.

Frequently Asked Questions

Do I owe inheritance tax if the person who died lived in a state without inheritance tax?

No. Inheritance tax is owed only if the person who died lived in Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania. Where you live does not matter. If they lived anywhere else, you owe no state inheritance tax.

Am I exempt from inheritance tax as a child?

It depends on which state the person who died lived in. Children are exempt in Iowa, Kentucky, Maryland, and Pennsylvania. In Nebraska and New Jersey, children are not exempt and may owe tax. Check the rules for the specific state.

Can I refuse an inheritance to avoid paying inheritance tax?

Yes, you can disclaim (refuse) an inheritance, which means you do not receive it and do not owe tax on it. However, the money or property then goes to whoever is next in line under the will or state law. You must disclaim within a specific time frame (usually nine months) and follow the state's formal process. Talk to an attorney before disclaiming, because the decision cannot be undone.

Who files the inheritance tax return—me or the executor?

The executor files the inheritance tax return with the state. You do not file it yourself. However, you should ask the executor what you owe and when, so you understand your liability.

What if I inherit property instead of money—do I still owe inheritance tax?

Yes. Inheritance tax applies to the fair market value of any property you inherit, including real estate, vehicles, investments, and personal items of value. The executor determines the value and includes it in the inheritance tax calculation.