Estate and inheritance taxes by state fall into two groups: twelve states plus the District of Columbia tax the estate before anything is distributed, and five states tax the individual beneficiaries who receive assets. Maryland is the only state that does both. State exemptions start as low as $1 million, so a family that owes nothing to the IRS under the $15 million federal exemption for 2026 can still owe six figures to a state.1Internal Revenue Service. What’s New — Estate and Gift Tax
Estate Tax and Inheritance Tax Are Not the Same Thing
An estate tax is paid by the estate itself before assets go out. The personal representative calculates what the estate owes based on its total value minus debts and deductions, and writes a check from the estate’s funds. The beneficiaries and their relationships don’t matter. If the estate exceeds the exemption, the tax applies.
An inheritance tax works the other way. The person receiving the assets owes the tax, and the rate depends on their relationship to the deceased. A surviving spouse typically pays nothing. A sibling might pay a moderate rate. An unrelated friend could face the steepest rate in the state. What matters is each beneficiary’s share and how close they were to the person who died, not the size of the estate as a whole.
The Twelve Estate Tax States and D.C.
The following jurisdictions impose a state-level estate tax for deaths in 2026. Each sets its own exemption independently of the federal government, which is why an estate well below $15 million can still trigger a state bill.
- Connecticut: ties its exemption to the federal basic exclusion amount, which was $13.99 million for 2025 and should rise to $15 million for 2026.2Connecticut State Department of Revenue Services. Estate and Gift Tax Information
- Hawaii: $5.49 million
- Illinois: $4 million
- Maine: $6.8 million
- Maryland: $5 million
- Massachusetts: $2 million3Commonwealth of Massachusetts. Massachusetts Estate Tax Guide
- Minnesota: $3 million
- New York: $7.35 million4Department of Taxation and Finance. Estate Tax
- Oregon: $1 million
- Rhode Island: approximately $1.77 million
- Vermont: $5 million
- Washington: filing threshold of approximately $2.19 million
- District of Columbia: exemption varies by year
Oregon and Massachusetts set the lowest bars in the country. A $2.5 million estate is modest for a longtime homeowner with retirement savings, yet it would trigger tax in both.
Rates and Two Traps to Know About
Most of these states use graduated rates that top out between 12% and 16%. Washington is the outlier. For deaths on or after July 1, 2025, Washington’s top marginal rate is 35% on taxable amounts above $9 million, the highest state estate tax rate in the country by a wide margin.5Washington Department of Revenue. Estate Tax Tables
New York has a cliff that catches families off guard. The 2026 exclusion is $7.35 million, but if the taxable estate exceeds 105% of that amount (roughly $7.72 million), the exclusion disappears entirely and tax is calculated from the first dollar.4Department of Taxation and Finance. Estate Tax A $7.3 million estate owes nothing; a $7.8 million estate could owe tax on the full $7.8 million. Valuation precision matters for any New York estate near the line.
The Five Inheritance Tax States
Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania impose an inheritance tax. Iowa fully repealed its inheritance tax effective January 1, 2025, so estates of anyone dying in 2026 or later owe nothing under Iowa’s old rules.6Justia. Iowa Code 450.98 – Tax Repealed
In every inheritance tax state, the rate depends on the beneficiary’s relationship to the deceased. States group heirs into classes, and closer relatives pay less or nothing.
Who Actually Pays
Surviving spouses are exempt in all five states. Children, grandchildren, and parents are also exempt in most of them. In New Jersey, this group, along with stepchildren and domestic partners, pays zero inheritance tax.7NJ.gov. Inheritance Tax Beneficiary Classes
Siblings face moderate rates. In Pennsylvania, siblings pay a flat 12% on everything they inherit, direct descendants pay 4.5%, and other heirs pay 15%.8Commonwealth of Pennsylvania. Inheritance Tax
Unrelated beneficiaries get hit hardest. In Kentucky, this group pays graduated rates from 6% to 16% after a $500 exemption.9Kentucky Department of Revenue. A Guide to Kentucky Inheritance and Estate Taxes If you plan to leave assets to a friend, a non-exempt charity, or a distant relative, the bite can be substantial.
Each beneficiary is individually responsible for their own inheritance tax, though the executor often withholds it from distributions before anyone receives a share.
Maryland’s Double Exposure
Maryland is the only state imposing both taxes, but it has a built-in offset. Inheritance tax paid to the Register of Wills is subtracted from the gross estate tax liability. If the inheritance tax equals or exceeds what the estate would owe in estate tax, no additional estate tax is due.10Register of Wills. Maryland Estate Tax Tip 42
Timing is the catch. If the inheritance tax hasn’t been paid by the estate tax due date, interest accrues on the unpaid estate tax balance until the inheritance payments catch up.10Register of Wills. Maryland Estate Tax Tip 42 Maryland executors have to coordinate both filings carefully.
When You Live in One State and Own Property in Another
Where you owe depends on two separate rules. Your domicile (the one state you consider your permanent home) controls which state taxes your worldwide intangible assets like stocks, bonds, bank accounts, and retirement funds. Real estate and other tangible property are taxed by the state where the asset physically sits, no matter where you live.
That means a Florida resident with a vacation home in Massachusetts can leave a Massachusetts estate tax bill behind on that property, even though Florida itself has no estate tax.11Illinois Attorney General. Estate Tax Instruction Fact Sheet Transferring title typically requires an ancillary probate proceeding in the state where the property sits, which is how the state asserts its share of tax against the property’s fair market value. The domicile state usually offers a credit for estate taxes paid elsewhere, so the same asset isn’t taxed twice, but the administrative work in both states remains.
States look at concrete evidence when determining domicile: voter registration, driver’s license, the address on your federal tax return, where your primary bank accounts sit, and your local affiliations. Someone who claims to have moved from an estate tax state to a no-tax state will get scrutinized on whether they actually severed ties or just started wintering somewhere warmer. If you move from Connecticut to Florida, update every document. Half-measures invite two states claiming you as their own.
Filing Deadlines and Penalties
The federal estate tax return is due within nine months of the date of death, and most estate tax states follow the same timeline.12Office of the Law Revision Counsel. 26 USC 6075 – Time for Filing Estate and Gift Tax Returns Extensions are available in most states, but they extend the time to file, not the time to pay. Interest on unpaid tax typically runs from the original due date regardless of any extension.
Late penalties add up. Kentucky charges 2% of tax due for every 30 days a payment is late, capped at 20%, plus a potential 25% collection fee if the balance remains unpaid after 60 days. Interest on unpaid Kentucky tax runs at 9% per year for 2026.13Kentucky Department of Revenue. Penalties, Interest and Fees Other states use similar structures.
Inheritance tax states often have separate filing requirements for each beneficiary, and the executor may need to obtain tax waivers before distributing certain assets. In Maryland, the inheritance tax is collected by the Register of Wills in the county where the deceased lived or owned property, adding another layer of coordination for executors already juggling the estate tax filing.14Register of Wills. Inheritance Tax – Register of Wills