Current inheritance tax rates in the United States range from 0% to 16%, and whether you owe anything depends almost entirely on where the person who died lived and how you were related to them. There is no federal inheritance tax. Only five states impose one: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Spouses are exempt in every one of them, close relatives usually pay little or nothing, and more distant heirs face the highest brackets.
The Federal Government Does Not Tax Inheritances
Nothing you inherit is subject to a federal inheritance tax, because no such tax exists. Federal law taxes large estates before assets are distributed, not the individual people who receive them.1Internal Revenue Service. Estate Tax That federal estate tax is set out in Chapter 11 of the Internal Revenue Code and only applies above the basic exclusion amount.2Office of the Law Revision Counsel. 26 USC Ch 11 – Estate Tax
For 2026, that exclusion is $15,000,000 per person. The One, Big, Beautiful Bill Act, signed on July 4, 2025, set the figure permanently and tied future adjustments to inflation starting in 2027.3Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax A married couple can shelter up to $30,000,000 combined. Fewer than one in a thousand estates end up owing anything at the federal level, so unless the estate you’re inheriting from is worth more than $15 million, federal transfer tax is not your problem.
The Five States That Still Charge Inheritance Tax
Iowa used to be on this list, but its inheritance tax was fully repealed for deaths on or after January 1, 2025.4Iowa Legislature. Iowa Code 450.98 – Tax Repealed Five states still impose the tax, and each sets its own rates and exemption categories.
Kentucky. Spouses and Class A relatives (children, parents, siblings by state definition) are fully exempt. More distant relatives pay graduated rates from 4% to 16%. Unrelated beneficiaries pay 6% to 16%.
Maryland. Spouses, children, grandchildren, parents, siblings, and registered domestic partners pay nothing. Everyone else pays a flat 10%. Maryland is also the only state that layers an inheritance tax on top of a state-level estate tax, so beneficiaries there can see two rounds of transfer taxation.
Nebraska. The state is phasing its tax out and rates fall to zero in 2028. For 2026, immediate family members pay 0.5% on amounts over $100,000. More distant relatives and unrelated heirs pay 3% on amounts above lower thresholds.
New Jersey. Spouses, children, parents, and grandparents (Class A) owe nothing. Siblings and in-laws (Class C) pay 11% to 16% after a $25,000 exemption. Unrelated beneficiaries (Class D) pay 15% to 16% from the first dollar.
Pennsylvania. Spouses pay 0%. Direct descendants pay 4.5%. Siblings pay 12%. All other heirs pay 15%. Pennsylvania knocks 5% off the tax bill if you pay within three months of the death.
Rates change, and Nebraska’s schedule will keep dropping before it disappears entirely. Confirm the current numbers with the state revenue department before you file.
How Your Relationship to the Deceased Changes the Bill
Every inheritance-tax state uses a class system that ties the rate to how close you were to the person who died. Spouses sit at the top of the ladder and are exempt everywhere. Children, grandchildren, and parents typically land in the most favorable taxable bracket, with the lowest rates and highest exemption thresholds. Siblings are treated less generously, especially in Pennsylvania (12%) and New Jersey (11% to 16%). Friends, unmarried partners who don’t qualify as registered domestic partners, and distant relatives consistently pay the highest rates.
A niece inheriting $200,000 might owe several thousand dollars in one of these states, while a spouse inheriting $2,000,000 in the same state owes zero on the same facts. Charities recognized under Section 501(c)(3) and government entities are exempt across all five states, so anything left to a qualifying nonprofit passes through tax-free.
Which Assets Get Counted
Inheritance tax reaches beyond what goes through probate. Several assets that transfer automatically at death still get pulled in, and that surprises people.
Jointly Held Accounts and Real Estate
Bank accounts and property held with right of survivorship pass directly to the surviving owner outside probate, but they’re generally still taxable in inheritance-tax states. The usual rule counts half the value as taxable when two people held the asset jointly. If the joint ownership was created within the last year of the decedent’s life, the full value may be taxed on the theory that the transfer was made to dodge the tax.
Life Insurance
Life insurance proceeds paid to a named beneficiary are not subject to federal income tax. State treatment varies. Maryland exempts life insurance paid to a named beneficiary from its inheritance tax. Other states may pull it in depending on how the policy is owned and who’s named. Policies payable to the estate itself, rather than a named person, are almost always taxable.
Real Estate in a Taxing State
Inheritance tax follows the property. If a Florida resident owned a rental house in Pennsylvania, whoever inherits that house can owe Pennsylvania inheritance tax on it, even though Florida has no such tax. Intangible property like stocks and bank accounts is generally taxed only by the decedent’s state of residence, while real estate and tangible personal property are taxed where they physically sit.
Inherited Retirement Accounts Are Their Own Category
Inherited IRAs and 401(k)s are generally not hit with state inheritance tax the way other assets are, but they do trigger federal income tax when you take distributions. Traditional accounts were funded with pre-tax dollars, so every withdrawal is taxed as ordinary income at your rate.5Internal Revenue Service. Retirement Topics – Beneficiary
For most non-spouse beneficiaries, the SECURE Act requires the entire inherited account to be emptied within 10 years of the original owner’s death. You can spread the withdrawals however you like across that period, but the account must be gone by the end of year ten. Spouses have more room: they can roll the account into their own IRA and delay required distributions until their own required beginning date.
Inherited Roth IRAs are the exception. Because Roth contributions went in after tax, qualified withdrawals come out tax-free. The 10-year rule still applies to non-spouse Roth beneficiaries, but the distributions themselves generally won’t raise your tax bill.5Internal Revenue Service. Retirement Topics – Beneficiary
The Step-Up in Basis Is the Bigger Tax Story
Even where no inheritance tax applies, capital gains rules matter. Inherited property gets a fresh tax basis equal to its fair market value on the date of death.6Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent This is the step-up in basis, and for most heirs it’s worth far more than the inheritance tax question.
Say your mother bought a house in 1990 for $120,000 and it was worth $450,000 when she died. If she had sold it, she would have owed capital gains on the $330,000 difference. Because you inherited it, your basis is $450,000. Sell for $460,000 and you owe capital gains on only $10,000. The pre-death appreciation vanishes for tax purposes.
The step-up applies to nearly all inherited assets: real estate, stocks, business interests, and collectibles. It applies whether or not the estate owed any federal estate tax. The main exception is property received as a gift during the donor’s lifetime, which keeps the donor’s original basis. In community property states, both halves of jointly owned marital property get a full step-up when one spouse dies, which is more generous than the 50% step-up in common-law states.
Filing and Paying if You Owe
If inheritance tax is due, you file with the taxing state’s revenue department, or in Nebraska with the county court. The filing requires the fair market value of every inherited asset as of the date of death. Real estate and business interests usually need a professional appraisal. For publicly traded stocks and bank accounts, statements showing the date-of-death value are enough.
Most states set the deadline at nine months after the date of death, which lines up with the federal estate tax return deadline.7Internal Revenue Service. Filing Estate and Gift Tax Returns Nebraska allows 12 months. Miss the deadline and interest starts accruing, often at 10% or more annually. If you know tax will be owed before the estate is fully settled, some states let you make a tentative payment to stop the clock on interest.
You’ll need proof of your relationship to the deceased. Marriage certificates, birth records, or adoption decrees decide which class you fall into and what rate applies. Once you file and pay, the state issues a clearance or closing letter confirming the obligation is satisfied. That letter matters in practice, because in several states real estate titles can’t transfer cleanly without it.