Navigating State Inheritance Taxes

When it comes to so-called “death taxes,” most discussion in the U.S. focuses on the federal estate tax, with little mention of state estate and inheritance taxes. Your estate is far more likely to be taxed at the state level if you live in one of the 13 states that have an estate tax. That’s because estates valued at up to $15 million ($30 million for married couples) are not subject to the federal estate tax, but estates as small as $2 million may be subject to state estate taxes. There is no federal inheritance tax, but five states levy the tax on inheritances as small as $1,000.

The enactment of the Tax Cuts and Jobs Act in 2017 resulted in far fewer individual estates facing the federal estate tax, as it raised the amount that was excluded from the tax from $5.5 million to just over $11 million. For married couples filing jointly, the estate tax increased from $11 million to $22 million. The 2025 One Big Beautiful Bill Act increased the federal estate tax exclusion again, to $15 million for individuals in 2026 and $30 million for married filing jointly. All of these numbers are adjusted annually for inflation.

For wealthy taxpayers, the increased federal estate tax exemption did not change their state estate and inheritance tax obligations. To make matters more complicated, each state has its own estate and inheritance tax rules. In the sections that follow, we will explain the differences between inheritance and estate taxes. We’ll also look at the filing thresholds and tax brackets for each state that imposes one of the taxes. For most states, there is either an estate tax or an inheritance tax, with Maryland being the only state that imposes both.

Estate Taxes vs. Inheritance Taxes

The primary difference between estate and inheritance taxes is the party responsible for paying. Estate taxes are usually assessed on the total value of an individual’s estate after they have died and are paid by the estate itself. The estate tax is paid before the heirs receive their inheritance, thereby reducing the amount they receive. State inheritance taxes are commonly paid by the individual who receives an inheritance from an estate.

The estate tax is collected based on the fair market value of the estate at the time of the decedent’s death. The decedent’s estate is based on the deceased’s:

• Money and financial accounts
• Investments
• Property, including real estate and business interests
• Other assets

The taxable estate’s value is usually reduced by any of the decedent’s unpaid debts and other obligations that must be paid by the estate.

The inheritance tax is assessed on the value of the assets received by each beneficiary. For example, a beneficiary who received a family business valued at $5 million would pay more in inheritance taxes than a beneficiary who inherited a vacation home valued at $500,000 from the same person.

States With an Estate Tax

The following jurisdictions collect an estate tax, each with its own exemption amount and estate tax rate. We’ve listed the date by which the estate tax return must be filed with the state’s department of revenue, along with the amount that is exempt from the estate tax for 2026.

In Connecticut, all estates are generally required to file an estate tax return, even if they are exempt from the state’s tax. For all other states, no return is required for estates that are exempt from the estate tax.

Connecticut

• Exemption: $15,000,000
• Rate: 12%
• Return must be filed within six months of death

District of Columbia

• Exemption: $4,988,000
• Rate: 11% to 16%
• Return must be filed within 10 months of death

Hawaii

• Exemption: $5,490,000
• Rate: 10% to 20%
• Return must be filed within nine months of death

Illinois

• Exemption: $4,000,000
• Rate: 0.8% to 16%
• Return must be filed within nine months of death

Maine

• Exemption: $7,160,000
• Rate: 8% to 12%
• Return must be filed within nine months of death

Maryland

• Exemption: $5,000,000
• Rate: 0.8% to 16%
• Return must be filed within nine months of death

Massachusetts

• Exemption: $2,000,000
• Rate: 0.8% to 16%
• Return must be filed within nine months of death

Minnesota

• Exemption: $3,000,000
• Rate: 13% to 16%
• Return must be filed within nine months of death

New York

• Exemption: $7,350,000
• Rate: 3% to 16%
• Return must be filed within nine months of death

Oregon

• Exemption: $13,610,000
• Rate: 10% to 16%
• Return must be filed within a year of death

Rhode Island

• Exemption: $1,838,056
• Rate: 0.8% to 16%
• Return must be filed within nine months of death

Vermont

• Exemption: $5,000,000
• Rate: 16%
• Return must be filed within nine months of death

Washington

• Exemption: $3,076,000
• Rate: 10% to 35%
• Return must be filed within nine months of death

Receiving an inheritance in any of these jurisdictions can be confusing. If you have any questions, consider getting guidance from either a tax professional or an estate attorney.

States With an Inheritance Tax

The following states assess an inheritance tax on the beneficiaries of an estate. Inheritance tax rates vary based on the amount of inherited assets and the beneficiary’s relationship with the deceased. In most cases, surviving spouses who are beneficiaries are exempt from the inheritance tax.

Kentucky

• Exemption: $1,000
• Rate: 0% to 16%
• Inheritance tax returns due within 18 months of death

Maryland

• Exemption: $1,000
• Rate: 0% to 10%
• Due when personal representative submits administrative account to the state’s Register of Wills

Nebraska

• Exemption: $100,000
• Rate: 0% to 15%
• Due within one year of death

New Jersey

• Exemption: $25,000
• Rate: 0% to 15%
• Due within eight months of death

Pennsylvania

• No exemption
• Rate: 0% to 15%
• Due on date of death, but not considered delinquent for nine months

These laws are subject ot change. If you’re receiving an inheritance in one of these states, speaking with an estate planning or tax attorney is a good idea.

Out-of-State Beneficiaries

A common inheritance and estate tax complication arises when the decedent lives in a state with a tax, but the beneficiary does not. Both the estate tax and the inheritance tax are imposed by the state where the decedent resided, so the beneficiary will likely have to pay them.

Let’s use an example. Felix lived in Maryland, which has both an estate and an inheritance tax. He left his entire estate, valued at $7 million, to his nephew Oscar in Iowa, which does not tax either. The estate may be required to pay Maryland inheritance tax on the amount by which the estate exceeds the state’s $5 million exemption ($2 million). Oscar would need to pay any inheritance tax due on amounts he receives above the exemption. These tax payments would be required even though Oscar lives in a state that has neither an estate tax nor an inheritance tax.

When To Contact an Estate or Tax Attorney

If you have received a substantial inheritance from someone who is not your spouse or parent and lived in a state with an inheritance tax, it’s a good idea to contact an estate or tax attorney to determine whether you owe anything. Each state has different rules regarding who is exempt from the tax and what tax brackets apply to beneficiaries who receive an inheritance. An attorney can determine when the inheritance tax is owed and how much.

Executors of an estate that might be subject to state or federal estate taxes should work with an attorney to ensure that the estate pays all of the taxes owed before it is distributed to the beneficiaries. The IRS and state revenue agencies can hold the executor liable for any unpaid estate taxes. In addition, the IRS and state revenue agencies often have the option to go after beneficiaries who received distributions from the estate if they find that taxes are still due. Meeting with an attorney who knows the tax laws can save you both money and headaches.