Inheritance Tax by State Calculator

Five states still impose a true inheritance tax, paid by the heir based on their relationship to the decedent: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa phased its inheritance tax down 20 points a year from 2021-2024 and fully repealed it for deaths on or after January 1, 2025 — heirs of an Iowa decedent now owe $0 regardless of relationship. No other state currently levies an inheritance tax, and there is no federal inheritance tax.

Estate tax is owed by the ESTATE, calculated on the decedent's total assets before distribution, and is paid out of estate funds before heirs receive anything — the federal government and 12 states + DC levy an estate tax. Inheritance tax is owed by the HEIR, calculated separately for each beneficiary based on the dollar amount they personally receive and their relationship to the decedent — only 5 states levy this. Maryland is the only state with BOTH; see the /estate-tax-calculator/ for the federal and state estate-tax side of the analysis.

Yes — it's the entire basis of the tax. Every inheritance-tax state exempts a surviving spouse completely. Close lineal relatives (children, grandchildren, parents) are exempt or taxed at low rates in most states. Siblings, nieces, nephews, and unrelated beneficiaries (friends, non-relatives) generally pay the highest rates — up to 16% in New Jersey, Kentucky, and Maryland's collateral-heir bracket.

Generally, inheritance tax is determined by where the DECEDENT lived (or where their real estate/tangible property is located), not where the beneficiary lives. If a Pennsylvania resident leaves money to a nephew in Texas, Pennsylvania inheritance tax still applies — Texas has no inheritance tax of its own, but that's irrelevant since the tax is assessed against the PA estate/transfer, not the beneficiary's home state.

In most inheritance-tax states, life insurance proceeds paid to a named beneficiary are exempt from inheritance tax (unlike the federal estate tax, which can include life insurance if the decedent held incidents of ownership). Pennsylvania and New Jersey specifically exempt life insurance proceeds paid to a named beneficiary. Always confirm with the specific state's Department of Revenue — rules on assignment and beneficiary designation can affect this.

Some options: naming a spouse as primary beneficiary (universally exempt), lifetime gifting below the federal annual exclusion to shift assets out of the estate before death, moving assets/domicile to a non-inheritance-tax state before death, and (in Pennsylvania) certain family-owned business and agricultural exemptions. Because these taxes are state-specific and relationship-driven, consult an estate attorney licensed in the decedent's state — generic advice can miss state-specific carve-outs like Maryland's domestic-partner or sibling exemptions.