Inheritance Tax States: Know Before You Die

Only five states still impose an inheritance tax in 2026, down from six after Iowa repealed its tax effective January 1, 2026. That number sounds small until you realize the bill goes to your heirs, not your estate, and it hits even modest inheritances in some states.

The Five States That Still Tax Inheritance

As of 2026, the states with an active inheritance tax are Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa was the sixth, but its inheritance tax is fully eliminated for deaths occurring on or after January 1, 2026.

Every one of these states structures the tax based on your relationship to the deceased. Spouses are universally exempt. Parents and children get favorable treatment in most states. The people who get hit hardest are distant relatives and non-family heirs.

Here is where rates land in each state:

• Kentucky: Rates run from 4% to 16% depending on the heir's relationship to the deceased. Immediate family members beyond a spouse, like siblings and children-in-law, face rates starting at 4%. Non-family heirs face up to 16%.
• Maryland: Inheritance tax sits at a flat 10% for non-exempt heirs. Maryland is also one of only two states in the country that imposes both an estate tax and an inheritance tax.
• Nebraska: Rates range by relationship. Immediate relatives pay 1%, remote relatives pay 13%, and distant or non-related heirs pay 18%. Nebraska has some of the highest rates for non-family recipients in the country.
• New Jersey: Rates start at 11% for Class C heirs (siblings, sons-in-law, daughters-in-law) and climb to 16%. Class D heirs, which covers most non-family members, pay 15% to 16% with very limited exemptions. New Jersey eliminated its estate tax back in 2018 but kept the inheritance tax.
• Pennsylvania: Rates are 4.5% for direct descendants, 12% for siblings, and 15% for all other heirs. Pennsylvania taxes transfers to adult children, which is more aggressive than most states.

Federal Inheritance Tax: It Does Not Exist

There is no federal inheritance tax. The federal government imposes an estate tax, but that applies to the estate itself before distribution, not to each heir on what they receive.

For 2026, the federal estate tax exemption is $13.99 million per individual. Estates below that threshold owe nothing federally. The vast majority of Americans will never trigger federal estate tax.

Inheritance tax is a separate, state-level tax paid by the person receiving assets. These are different mechanisms, and confusing them leads to bad planning decisions. If you want the full picture on what estates owe before assets ever reach heirs, read our breakdown in Estate Tax by State: Where Your Heirs Pay Most.

Who Actually Pays and When Exemptions Kick In

Most inheritance tax states exempt direct lineal heirs to varying degrees. In Pennsylvania, a surviving spouse pays 0% and a direct descendant pays 4.5%, but that 4.5% applies even to transfers from a parent to an adult child with no minimum threshold exemption. On a $300,000 inheritance, that is $13,500 owed.

Nebraska recently raised its exemption thresholds under 2023 legislation. Immediate relative exemptions increased to $100,000 per heir before the 1% rate kicks in. That is a meaningful improvement, but remote relatives still face 13% with only a $40,000 exemption.

In New Jersey, siblings only get a $25,000 exemption before the 11% rate starts. A sibling inheriting $200,000 in New Jersey owes $19,250 after the exemption.

The location of the deceased determines which state's tax applies, not where the heir lives. If your parents die in Pennsylvania and leave you their house, you owe Pennsylvania inheritance tax regardless of where you live.

For retirees thinking about where to settle, this tax is one of several reasons certain states cost more over a lifetime. Our guide on Best States for Retirees to Avoid Taxes covers the full picture, including income tax treatment of retirement distributions and pension exemptions.

States With No Inheritance Tax

Forty-five states collect zero inheritance tax. If avoiding this tax matters to your estate plan, states like Florida, Texas, Nevada, and Tennessee take nothing from heirs at the state level. Many of these states also have no income tax, making the overall tax burden significantly lower for both retirees and their beneficiaries. See the full comparison in States With No Income Tax in 2026.

Domicile planning, meaning legally establishing residency in a no-tax state before death, is a legitimate and common strategy. It requires more than just owning a vacation home. Courts look at voter registration, driver's license, time spent in state, and other factors.

Use our state tax calculator to model exactly what your heirs would owe based on your current state versus alternatives.

Key Takeaways

• Only 5 states impose inheritance tax in 2026: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa eliminated its tax effective January 1, 2026.
• Nebraska charges non-family heirs up to 18%. New Jersey charges siblings 11% to 16% after only a $25,000 exemption. Pennsylvania charges adult children 4.5% with no meaningful minimum threshold.
• There is no federal inheritance tax. The federal estate tax only applies to estates above $13.99 million in 2026 and is paid by the estate, not the heir.

Compare your current state against the lowest-tax alternatives at LiveOrDieHere.com and see exactly what your heirs stand to save.