Inheritance Tax
Who pays inheritance tax in the US: the five states that tax heirs and their rates, how it differs from the federal estate tax ($15 million exemption in 2026), and whether an inheritance is taxable income.
Do I owe inheritance tax?
Inheritance tax in the US
There is no federal inheritance tax. Only five states tax the people who inherit, based on where the person who died lived (or where real estate is), and most exempt spouses:
| State | Rates | Who pays |
|---|---|---|
| Kentucky | 4% – 16% | Exemptions depend on the beneficiary's class |
| Maryland | 10% | Applies to non-exempt beneficiaries; up to $1,000 to any one person is exempt |
| Nebraska | 1% – 15% | Immediate relatives 1% over $100,000 each; remote relatives 11% over $40,000; others 15% over $25,000 |
| New Jersey | 0% – 16% | Exemptions depend on the beneficiary's class |
| Pennsylvania | 0% – 15% | Rate depends on the beneficiary's relationship |
Iowa repealed its inheritance tax for deaths on or after January 1, 2025 (rates as of October 1, 2025, from KeyBank's 2026 state summary).
Inheritance tax vs estate tax
An estate tax is paid by the estate before assets are distributed; an inheritance tax is paid by the person receiving them. The federal estate tax applies only to estates above the $15,000,000 basic exclusion for 2026, and the annual gift tax exclusion is $19,000 per recipient. A number of states have their own estate taxes with lower thresholds.
Is an inheritance taxable income?
No: inherited money and property aren't income for federal income tax. But income they produce later is (interest, dividends), withdrawals from an inherited traditional IRA or 401(k) are taxable (see the inherited IRA RMD calculator), and inherited assets generally get a stepped-up cost basis, which reduces capital gains tax when you sell.
Common questions
Is there a federal inheritance tax?
No. Only Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania have inheritance taxes.
Does Iowa still have an inheritance tax?
No, it was repealed for deaths on or after January 1, 2025.
What is the federal estate tax exemption for 2026?
$15,000,000 per person; estates below it owe no federal estate tax.
Do I pay income tax on an inheritance?
Not on the inheritance itself, but withdrawals from inherited pre-tax retirement accounts and later investment income are taxable.
Sources
- KeyBank: 2026 state summary of inheritance, estate and gift taxes
- JD Supra: 2026 federal estate exemption $15,000,000
More paycheck and tax calculators: Gift Tax · Head of Household · IRS 941 · IRS Form 843
Related
- Inherited IRA RMD calculator
- Capital gains tax calculator
- Property gains tax calculator
- State income tax rates 2026
General information, not financial, tax or legal advice. Check important numbers with the official source before acting on them.