Inheritance Tax Calculator (by State)

Unlike federal estate tax, there is no large, uniform exemption for state inheritance tax. The amount you owe depends entirely on state law, and the rules vary dramatically based on your relationship to the person who passed away. Close relatives, like children, often pay a low rate or are completely exempt, while more distant relatives or unrelated friends can face tax rates exceeding 15%.

The table below summarizes the simplified 2026 inheritance tax rules for the five states that levy the tax. Note that these are simplified rates for common scenarios; each state has complex brackets and specific provisions.

Note: Iowa's inheritance tax was fully phased out for deaths occurring on or after January 1, 2025. Spouses are exempt in all states with an inheritance tax.

Many people use the terms "inheritance tax" and "estate tax" interchangeably, but they are fundamentally different taxes that can have a major impact on your financial planning. Understanding the difference is key to managing your own estate and navigating the process of receiving a bequest.

Estate Tax is a tax levied on the total value of a deceased person's estate before any assets are distributed to heirs.

• Who Pays: The estate itself. The executor of the estate is responsible for calculating and paying this tax from the estate's assets.
• Who Levies It: The federal government and about a dozen states.
• Key Threshold: The 2026 federal estate tax exemption is approximately $13.99 million per individual. This means the vast majority of estates will never owe federal estate tax. However, this high exemption is scheduled to be cut roughly in half in 2026 unless Congress acts.

Inheritance Tax is a tax levied on the assets received by a beneficiary or heir from an estate.

• Who Pays: The heir or beneficiary. The tax is based on who you are and how much you receive.
• Who Levies It: Only five states (KY, MD, NE, NJ, PA). There is no federal inheritance tax.
• Key Threshold: Exemptions are much lower and are based on the heir's relationship to the deceased, not the total size of the estate.

The most unique case is Maryland, which is the only state in the U.S. that levies both an estate tax and an inheritance tax. For very large estates, this can create a complex tax situation that often requires professional guidance from an estate planning attorney. For smaller estates, a simple retirement calculator might be sufficient to model the impact of a net inheritance.

The core logic of inheritance tax is that the closer your family relationship to the deceased, the less tax you will pay. States formalize this through "classes" of beneficiaries. While the names vary by state (e.g., Class A, Lineal Heirs, Immediate Relatives), the concept is the same.

• Closest Relatives (Often Class A): This group almost always includes spouses (who are typically 100% exempt), children, stepchildren, grandchildren, and parents. In most states, these heirs pay the lowest rate or are completely exempt from inheritance tax. For example, in New Jersey and Maryland, these direct descendants owe nothing.

• Intermediate Relatives (Often Class B or C): This category often includes siblings, nieces, nephews, and children-in-law. Tax rates and exemptions for this group vary significantly. In Kentucky, nieces and nephews face rates up to 16%, while in Pennsylvania, siblings pay a flat 12%.

• Distant or Unrelated Heirs (Often Class C or D): This includes all other beneficiaries, such as cousins, friends, or unmarried partners. This group consistently faces the highest tax rates and receives the smallest (or zero) exemptions. In Nebraska, an unrelated friend inheriting assets faces a steep 15% tax on amounts over a small $25,000 exemption.

This tiered system means that two people receiving the exact same amount of money from the same estate can have vastly different tax bills. A daughter inheriting $100,000 in Pennsylvania would owe $4,500 (4.5%), while a close friend inheriting $100,000 would owe $15,000 (15%). This is especially important when dealing with an inherited IRA, where you must also manage income tax on distributions.

The calculator determines your potential tax liability by applying the specific rules of the state you select to your inheritance amount. The core calculation follows three main steps.

First, it determines the portion of your inheritance that is subject to tax:

Taxable Amount = Gross Bequest - Exemption Amount - Other Deductions

Where:

• Gross Bequest = The total value of the assets or cash you are set to inherit.
• Exemption Amount = The portion of the inheritance that is not taxed, based on the state and your relationship to the deceased.
• Other Deductions = Any additional state-specific deductions you've entered.

Next, it calculates the tax itself by applying the relevant rate to the taxable amount:

Estimated Inheritance Tax = Taxable Amount × State Tax Rate

Finally, it calculates the amount you will receive after the tax is paid:

Net Inheritance = Gross Bequest - Estimated Inheritance Tax

This net amount is what you can then incorporate into your own financial plans, whether that's boosting your retirement savings, paying off debt, or determining how long your money will last.

While inheritance tax is paid by the heir, most strategies to reduce it must be implemented by the decedent as part of their estate plan. If you are involved in planning with a loved one, or for your own estate, consider these options:

1. Lifetime Gifting: The person leaving the bequest can give gifts during their lifetime. The federal annual gift tax exclusion allows an individual to give up to a certain amount ($18,000 in 2024, indexed for inflation) to any number of individuals per year without tax consequences. This reduces the size of the estate at death, thereby reducing the amount subject to potential inheritance tax.

2. Using Trusts: Certain types of trusts can be used to pass assets outside of the probate estate. An Irrevocable Life Insurance Trust (ILIT), for example, can hold a life insurance policy. When the person dies, the death benefit is paid to the trust and distributed to beneficiaries according to the trust's terms, often bypassing both probate and inheritance taxes.

3. Life Insurance: In most states, the proceeds from a life insurance policy that are paid directly to a named beneficiary (rather than to the estate itself) are not subject to inheritance tax. This makes life insurance a powerful tool for providing tax-free liquidity to heirs. A life insurance needs calculator can help determine appropriate coverage levels.

4. Changing Domicile: For those with significant assets, moving from one of the five inheritance tax states to one of the 45 states without it can eliminate the tax entirely. This is a major life decision and requires establishing legal residency, but it is the most direct strategy.

Consulting with an elder care attorney or estate planning professional is the best way to navigate these complex strategies and ensure they align with your family's goals.

What is inheritance tax?

Inheritance tax is a state-level tax paid by a person who receives money or property from the estate of a deceased person. The tax rate and exemption amount depend on the state where the deceased lived and the beneficiary's relationship to them. It is different from an estate tax, which is paid by the estate itself.

Which states have an inheritance tax in 2026?

As of 2026, only five states levy an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa repealed its inheritance tax effective January 1, 2025.

Is an inheritance considered taxable income by the IRS?

No, inheritances are not considered taxable income for federal income tax purposes. You do not need to report a cash inheritance as income on your federal tax return. However, if you inherit property that later generates income (like rental income from a house or dividends from stock), that subsequent income is taxable.

How is inheritance tax different from estate tax?

Inheritance tax is paid by the heir receiving the assets, and the rate depends on their relationship to the decedent. Estate tax is paid by the deceased's estate before assets are distributed, and it's based on the total net value of the estate. Only Maryland has both.

Are spouses exempt from inheritance tax?

Yes, in all five states that have an inheritance tax, surviving spouses are completely exempt from paying it. This also typically applies to assets jointly owned by the spouses.

Do I have to pay taxes on an inherited IRA?

Yes, but you pay income tax, not inheritance tax (in most cases). When you withdraw money from a traditional (pre-tax) Inherited IRA, those distributions are taxed as ordinary income. The rules for these withdrawals are complex, and using an inherited IRA tax calculator can help you plan for the tax impact.

How can I pay the inheritance tax bill?

Payment procedures vary by state. Generally, the tax is due within a specific timeframe after the date of death (e.g., nine months in Pennsylvania). Heirs can use funds from the inheritance itself, other personal assets, or sometimes work out a payment plan with the state's department of revenue if needed.

Receiving an inheritance often requires careful planning to ensure the assets are used effectively to support your financial goals. Once you have an estimate of your net, after-tax inheritance, you can begin to model its impact. Use a tax-efficient retirement withdrawal calculator to see how to best integrate these new assets, or see how long your money will last in retirement with this new capital. An inheritance can also significantly change the timeline for financial independence, a possibility you can explore with the FIRE calculator.

Last updated: July 2026