States With Inheritance Tax

Learn how inheritance tax affects the bequests left to you

As if losing a loved one wasn’t hard enough, you might also have to add death tax on the property that you receive from the estate — depending on where you live — in addition to all the costs of dying. As of 2018, Iowa, Kentucky, Nebraska, New Jersey, Maryland and Pennsylvania levy inheritance taxes.

So what is inheritance tax? The answer varies based on the laws in each state, so consult an attorney or accountant in your state to find out exactly how your inheritance will be taxed.

Check out the following table to see states with inheritance tax, and read on to find out what you need to know about inheritance tax so you can better understand death-related expenses.

States With Inheritance Tax
StateTax RatesExempt AssetsExempt BeneficiariesDue Date
Iowa5 to 15%Estates worth less than $25,000
Life insurance policies paid to a named beneficiary
Parents and lineal ancestors
Spouses, children, stepchildren and lineal descendants
9 months after death
Kentucky4 to 16%Inheritances of $1,000 or less for nieces, nephews, children-in-law, aunts, uncles, great-grandchildren
Life insurance paid to a named beneficiary
Spouse, parents, children, grandchildren, siblings and half-siblings18 months after death, 5 percent discount if paid within 9 months
Maryland10%Inheritances worth less than $1,000
Life insurance paid to a named beneficiary
Bequest of a primary residence to a domestic partner
Parents, stepparents and other lineal ancestors
Spouse, children and other lineal descendants, stepchildren and siblings
Determined by Registrar of Wills for county where the decedent lived or owned property
Nebraska1 to 18%First $10,000 to $40,000 per beneficiary, depending on class of beneficiary
Life insurance paid to a named beneficiary
Real property owned outside of Nebraska
Limited amounts under the homestead allowance
Family allowance
Certain personal property to a surviving spouse and children
SpouseWithin 12 months of death
New Jersey11 to 16%Inheritances worth less than $500
Life insurance paid to a named beneficiary
Certain state and federal government retirement plans
Spouse, civil union partner, domestic partner, child or lineal descendants, parent or lineal ancestor, stepchildren; plus qualified charities, religious institutions, the State of New Jersey8 months after the date of death
Pennsylvania4.5 to 15%Certain farmland
Retirement plans that cannot be accessed without penalty
Surviving spouses, children under 21 and charities9 months after death; 5% discount if paid within 3 months


Check Out: Complete CD Tax Guide — From Death Taxes to Interest Income Taxes

How Much Is Inheritance Tax?

Inheritance taxes vary from state to state, including which transfers are exempt from estate taxes entirely. For example, Pennsylvania exempts not only transfers to spouses and charities, but also children under 21 years old. So, if you’re 20 and your sibling is 22 when your parent dies, you wouldn’t owe any inheritance tax, but your sibling would.

Only Nebraska imposes an inheritance tax on all children, with Iowa, Kentucky, Maryland and New Jersey exempting children entirely. All states exempt spouses for inheritance tax, and New Jersey also makes specific reference to certain civil union partners and domestic partners.

In addition, states often impose different tax rates depending on who is inheriting the money. For example, Iowa charges an inheritance tax between 5 and 10 percent for siblings and children-in-law, between 10 and 15 percent for more distant relatives, and 15 percent for for-profit entities. Nebraska has one of the widest ranges of inheritance tax rates, with immediate family members like children being charged just 1 percent on the portion of the inheritance exceeding $40,000, up to non-family members being charged 18 percent on the portion of the inheritance exceeding $10,000.

Property Subject to Inheritance Tax

You’ll also find differences among the states as to which property is subject to estate taxes. For example, in Nebraska, the first $40,000 that you inherit is exempt from inheritance tax. Pennsylvania exempts certain transfers of farmland and agricultural property. In addition, Maryland, Iowa, Kentucky, Nebraska, Pennsylvania, New Jersey, exempt life insurance proceeds when they are paid to a named beneficiary. But if the proceeds of the policy are paid to the estate, those proceeds are subject to tax. New Jersey also exempts certain payments from state and federal government retirement plans.

Learn: How to Minimize Your Estate Tax 

Inheritance Tax Law Changes

The federal government does not impose an inheritance tax, so the Trump tax changes did not affect the inheritance taxes imposed by the states. The Trump tax changes did, however, change the federal estate tax exemption. But, just because the inheritance taxes didn’t change in 2018 doesn’t mean state legislatures won’t change them going forward.

Inheritance Taxes vs. Estate Taxes

Because both are paid upon someone’s death, inheritance taxes and estate taxes are easy to confuse. The difference lies in who pays inheritance tax and estate tax: With an inheritance tax, the tax is paid by the people inheriting the money and the tax rate is often dependent on the beneficiary’s relationship to the decedent. With an estate tax, the tax is paid at the estate level prior to the money being distributed to the beneficiaries. Other than bequests to charities and a surviving spouse, which are generally exempt, estate taxes are the same regardless of who the beneficiary is.

Up Next: How to File Taxes for a Deceased Relative