Taxes collected on property and assets passed on after someone's death are sometimes called "death taxes." There can be two kinds of death taxes—inheritance taxes and estate taxes.
Key Takeaways
- An inheritance tax is a tax paid by the recipients of property from a deceased person's estate.
- In contrast, an estate tax is a tax on the entire value of the estate, and is paid for by the estate.
- Only six U.S. states levy an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Six states collect a state inheritance tax as of 2022, and oneof them—Maryland—collects an estate tax as well. The chart below shows the 2022 estate taxes for 12 states and the District of Columbia, as well as the exemption amount.
Inheritance Taxes vs. Estate Taxes
At first glance, the difference between an estate tax and an inheritance tax may appear to be just semantics. Both are collected as the result of someone's death, but an inheritance tax is based on an individual bequest of property—literally each inheritance. An estate tax is assessed against the overall value of a decedent's estate.
A decedent's estate is responsible for paying the estate tax, whereas the beneficiary is liable for the inheritance tax. Often, however, the estate will pick up the tab. Some people include provisions for inheritance tax in their wills, to spare their beneficiaries that tax burden. Twelve states and the District of Columbia collect a state estate tax as of 2022. The federal government also has an estate tax, but it does not collect an inheritance tax.
How Inheritance Taxes Work
Surviving spouses are exempt in all six states that collect an inheritance tax. New Jersey also exempts surviving civil union or domestic partners. Beyond that, however, things get more complicated.
In some states, such as Kentucky, sons, daughters, and parents are exempt from this tax as well. They typically pay the lowest inheritance tax rate in states where they're not exempt, and they're given more generous dollar exemptions—certain amounts they can inherit before the tax is levied on the balance.
Life insurance payable to a named beneficiary is not typically subject to an inheritance tax, although life insurance payable to the deceased person or to his estate is usually subject to an estate tax.
The Push To Repeal State "Death Taxes"
Both state estate taxes and state inheritance taxes have been on the chopping block lately. Ohio's estate tax was repealed effective January 1, 2013. Tennessee's estate tax was repealed effective January 1, 2016, and Indiana's inheritance tax, which was supposed to be phased out by January 1, 2022, ended up being retroactively repealed to January 1, 2013. New Jersey also eliminated tax on estates of decedents who passed away after January 1, 2018, although its inheritance tax is still in place.
Initiatives were floated to repeal Nebraska's inheritance tax and North Carolina's estate tax in 2012, but nothing happened on this front in Nebraska. North Carolina's estate tax was ultimately repealed in July 2013. On November 6, 2012, Ballot Measure 84, which would have repealed Oregon's estate tax by January 1, 2016, was defeated by a margin of 54% in favor of keeping the tax.
State Inheritance Tax Chart
Below is a chart that summarizes the details of the current laws that govern inheritance taxes in the six states that collect them. Descendants include children and grandchildren. The lowest tax rates apply to the most closely related non-exempt family members. Unrelated individuals and other entities are typically subject to the highest rates, although charitable organizations are typically exempt.
| State Inheritance Tax | |||||||
|---|---|---|---|---|---|---|---|
| State | Are Spouses Exempt? | Are Descendants Exempt? | Are Domestic Partners Exempt? | Is Life Insurance Exempt? | 2022 Tax Rate | Tax Form | Due Date |
| Iowa* | Yes | Yes | No | Yes | 0% to 10% | Form IA 706 | Last day of ninth month after death |
| Kentucky | Yes | Yes | No | Yes | 0% to 16% | Form 92A200, 92A202, or 92A205 | 18 months after death |
| Maryland** | Yes | Yes | Certain transfers | Yes | 0% to 10% | Varies | Varies |
| Nebraska | Yes | No | No | Yes | 0% to 18% | Form 500 | 12 months after death |
| New Jersey | Yes | Yes | Yes | Yes | 0% to 16% | Form IT-R or IT-NR | 8 months after death |
| Pennsylvania | Yes | No | No | Yes | 0% to 15% | Form REV-1500 or REV-1737A | 9 months after death |
*Iowa does not levy an inheritance tax in cases where the decedent's entire net estate is valued at $25,000 or less. Iowa is also working on phasing out its inheritance tax by 2025, by reducing it every year by 20%.
**Maryland does not impose an inheritance tax on beneficiaries of simplified estates with total probate property values of less than $30,000.
Frequently Asked Questions (FAQs)
Who pays inheritance tax?
Inheritance tax is paid by the beneficiary or the person who receives the property. Only six U.S. states levy an inheritance tax (Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania).
What is inheritance tax?
Inheritance tax is a tax paid by the beneficiaries of a deceased person's estate. An estate tax, in contrast, is a tax on the estate, or the property, of the deceased. Inheritance tax is not common; only six U.S. states levy one. Rates are graduated according to the beneficiary's relationship with the decedent, with immediate relatives usually exempt.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
Tax Foundation. "Does Your State Have an Estate or Inheritance Tax?"
New Jersey Division of Taxation. "General Information - Inheritance and Estate Tax."
Kentucky Department of Revenue. "A Guide to Kentucky Inheritance and Estate Taxes," Page 3.
Ohio Department of Taxation. "Estate Tax."
Indiana Department of Revenue. "Information on Inheritance Tax."
Tennessee Department of Revenue. "Inheritance Tax."
North Carolina Department of Revenue. "2013 Tax Law Changes."
Oregon Secretary of State. "2012 General Election Results," Page 37.
Iowa Department of Revenue. "Iowa Inheritance Tax Rates: 2021."
