Estate Tax by State: Where Your Heirs Pay Most

Twelve states plus Washington D.C. collect their own estate or inheritance tax, separate from the federal government. Die in the wrong state with a $2 million estate, and your heirs could owe six figures in taxes that they would owe nothing on elsewhere.

Federal vs. State: Two Separate Bills

The federal estate tax exemption sits at $13.99 million per individual in 2026. Below that threshold, the federal government takes nothing. Most Americans never touch it.

State taxes are a different story. Several states set their exemptions far lower, meaning a middle-class estate that clears the federal bar entirely can still trigger a state tax bill. These two systems operate independently, and owing one does not offset the other.

The States With Estate Taxes in 2026

Eleven states and Washington D.C. levy an estate tax, meaning the estate itself pays before assets transfer to heirs.

Connecticut has the highest exemption at $13.99 million, matching the federal threshold, with a 12% rate above that. In practice, very few Connecticut estates pay.

Massachusetts and Oregon set their exemptions at $1 million, the lowest in the country. A home, a retirement account, and some savings can push an ordinary estate over that line in either state. Massachusetts taxes the entire estate value once it crosses $1 million, not just the amount above the threshold, which makes it one of the most punishing systems in practice. The top rate in Massachusetts is 16%.

Illinois exempts $4 million with rates up to 16%. Hawaii exempts $5.49 million but applies a top rate of 20% on estates over $10 million, the highest estate tax rate in the country.

Other estate tax states include Maine ($6.8 million exemption), Vermont ($5 million), Rhode Island ($1.77 million), Minnesota ($3 million), Washington state ($2.193 million), Maryland ($5 million), and Oregon at the bottom with Massachusetts at $1 million.

The States With Inheritance Taxes

Six states tax the heir rather than the estate. The rate often depends on the heir's relationship to the deceased.

Iowa phased out its inheritance tax for deaths occurring on or after January 1, 2026. That is a recent win for Iowa residents.

Kentucky still applies inheritance tax on transfers to anyone other than a spouse or parent. Distant relatives and non-family heirs face rates up to 16% on amounts above $500.

Nebraska charges 1% to 15% depending on the heir's relationship, with distant relatives and non-relatives facing the steepest rates.

New Jersey eliminated its estate tax in 2018 but kept the inheritance tax. Non-immediate family members pay between 11% and 16% on inheritances above $500.

Pennsylvania charges 4.5% for transfers to direct descendants, 12% for siblings, and 15% for all other heirs. There is no exemption threshold.

Maryland is the only state that imposes both an estate tax and an inheritance tax, making it uniquely expensive for heirs.

Note that Iowa dropped inheritance tax as of January 1, 2026, so the commonly cited "six states" list now effectively stands at five active inheritance tax states: Kentucky, Nebraska, New Jersey, Pennsylvania, and Maryland.

How Much Can You Inherit Without Paying Federal Income Tax?

Inherited assets generally are not treated as income under federal law. You do not report an inheritance on your federal income tax return. However, any income the inherited assets generate after you receive them is taxable. And if the estate is large enough, the estate itself may owe federal estate tax before you receive anything.

Lifetime gifts work differently. The federal lifetime gift tax exemption is unified with the estate tax exemption, currently $13.99 million in 2026. Gifts above the annual exclusion ($18,000 per recipient in 2024, $19,000 in 2026) count against that lifetime limit. Proper gifting strategy can reduce the taxable estate significantly, but it requires planning well before death.

If you are weighing tax burden across your full retirement picture, the Best States for Retirees to Avoid Taxes breaks down how estate taxes fit alongside income, Social Security, and property tax costs. You can also see how States With No Income Tax in 2026 stack up, since several of them also impose no estate tax.

Run your specific numbers with the Live or Die Here state tax calculator to see what your heirs would owe based on your current state of residence versus alternatives.

Key Takeaways

• Massachusetts and Oregon have the lowest estate tax exemptions in the country at $1 million, meaning a modest estate can trigger a tax bill at rates up to 16%.
• Hawaii applies the highest estate tax rate in the country at 20% on estates exceeding $10 million.
• Five states still impose inheritance taxes as of 2026: Kentucky, Nebraska, New Jersey, Pennsylvania, and Maryland. Maryland is the only state with both an estate tax and an inheritance tax.

Compare your current state against every alternative at Live or Die Here and see exactly what your estate planning decisions are worth in dollars.