Two different taxes get lumped together every time someone says “death tax,” and the confusion costs people real money in bad planning decisions. The estate tax is levied on the estate itself, before anything is distributed — the federal government and a handful of states charge it. The inheritance tax is levied on the person who receives the money, and only five states still impose it in 2026: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
They can even overlap. Maryland is the only state that charges both — a large Maryland estate can owe the state’s estate tax before distribution, and then an individual heir can owe Maryland’s inheritance tax on top of what they receive. Everywhere else, it’s one or the other (or, for 45 states plus DC, neither).
This guide covers the inheritance tax only: who owes it, how the rate depends entirely on your relationship to the person who died, and what changed when Iowa became the most recent state to repeal its version.
Which States Have an Inheritance Tax in 2026
| State | Who is fully exempt | Taxable relationships & top rate | Threshold before tax applies |
|---|---|---|---|
| Pennsylvania | Spouse (incl. jointly-held spousal property) | Lineal heirs 4.5%, siblings 12%, everyone else 15% | None — tax applies from dollar one for non-spouse heirs |
| Kentucky | Class A: spouse, parent, child, stepchild, grandchild, sibling, half-sibling | Class B (niece/nephew, in-laws, aunt/uncle, great-grandchild) up to 16%; Class C (everyone else) up to 16% | $1,000 (Class B) / $500 (Class C) exemption |
| Maryland | Spouse, child, stepchild, grandchild, great-grandchild, parent, grandparent, sibling, registered domestic partner | Collateral heirs (niece, nephew, aunt, uncle, cousin, friend, unrelated): flat 10% | $1,000 exemption |
| Nebraska | Spouse (outside the class system entirely) | Class 1 (children/parents/siblings/other lineal) 1%; Class 2 (aunt/uncle/niece/nephew) 11%; Class 3 (everyone else) 15% | $100,000 / $40,000 / $25,000 by class |
| New Jersey | Class A: spouse/civil union/domestic partner, child (incl. step & adopted), grandchild and further descendants, parent, grandparent | Class C (sibling, son-in-law, daughter-in-law) 11%–16%; Class D (everyone else) 15%–16% | $25,000 (Class C) / $0 (Class D) exemption |
| Iowa | Everyone — tax fully repealed | N/A | N/A — repealed for deaths on/after January 1, 2025 |
Every taxing state exempts a spouse outright, and every taxing state except New Jersey’s Class D bracket gives at least some exemption before the rate applies. The pattern across all five: the closer the family relationship, the lower (or zero) the rate — the further away, the higher.
How Relationship Class Drives the Rate
None of these five states use a flat statewide rate. Each defines its own tiers of relationship — usually called “classes” — and every dollar you inherit is taxed according to which class you fall into, not the size of the estate. A $50,000 inheritance from a sibling in Pennsylvania is taxed completely differently than the same $50,000 from a sibling in Nebraska.
Pennsylvania
No exemption thresholds — Pennsylvania taxes from the first dollar for anyone but a spouse. A 5% discount applies if the tax is paid within three months of death; the full balance is due nine months after death.
| Class | Who’s included | Rate |
|---|---|---|
| Spouse | Surviving spouse (incl. jointly-held spousal property) | 0% |
| Lineal heir | Children, grandchildren, parents, grandparents, and their spouses | 4.5% flat |
| Sibling | Brothers and sisters (incl. half-siblings) | 12% flat |
| All other heirs | Nieces, nephews, friends, unrelated beneficiaries | 15% flat |
Kentucky
Kentucky has had no separate estate tax since January 1, 2005 — inheritance tax is the only transfer tax the state collects. A 5% discount applies if paid within nine months of death.
| Class | Who’s included | Exemption | Rate |
|---|---|---|---|
| Class A | Spouse, parent, child, stepchild, grandchild, sibling, half-sibling | Fully exempt | 0% |
| Class B | Niece, nephew, half-niece/nephew, son/daughter-in-law, aunt, uncle, great-grandchild | $1,000 | Graduated 4% to 16% |
| Class C | Everyone else — cousins, friends, nieces/nephews by marriage, unrelated | $500 | Graduated 6% to 16% |
Kentucky’s Class B brackets run 4% to $10,000 of taxable value, then 5%/6%/8%/10%/12%/14% at successive tiers, topping out at 16% above $200,000. Class C runs 6%/8%/10%/12%/14% and reaches 16% above $60,000 of taxable value.
Maryland
Maryland is unique among the five: it charges both an estate tax (paid by large estates before distribution — see the Estate Tax Calculator) and an inheritance tax (paid by the individual heir). The two can both apply to the same estate.
| Class | Who’s included | Exemption | Rate |
|---|---|---|---|
| Exempt relationships | Spouse, child, stepchild, grandchild, great-grandchild, parent, grandparent, sibling, registered domestic partner | Fully exempt | 0% |
| Collateral heir | Niece, nephew, aunt, uncle, cousin, friend, unrelated | $1,000 | Flat 10% |
Nebraska
Nebraska rewrote its inheritance tax with LB310 (2022), effective for deaths on or after January 1, 2023 — cutting rates and raising exemptions across every class versus the old schedule.
| Class | Who’s included | Exemption | Rate |
|---|---|---|---|
| Spouse | Surviving spouse — outside the class system entirely | Fully exempt | 0% |
| Class 1 | Children, parents, siblings, grandchildren and other lineal descendants/ascendants | $100,000 | Flat 1% |
| Class 2 | Aunts, uncles, nieces, nephews and their lineal descendants | $40,000 | Flat 11% |
| Class 3 | All other beneficiaries — friends, unrelated | $25,000 | Flat 15% |
Nebraska’s Class 1 rate — just 1%, after a $100,000 per-recipient exemption — is by far the gentlest treatment of close (non-spouse) family of any taxing state.
New Jersey
New Jersey repealed its separate estate tax for deaths on or after January 1, 2018, so — like Kentucky and Nebraska — only the inheritance tax remains. Class B was eliminated by statute; Class E (qualifying charities and government) is fully exempt.
| Class | Who’s included | Exemption | Rate |
|---|---|---|---|
| Class A | Spouse/civil union/domestic partner, child (incl. step & adopted), grandchild and further descendants, parent, grandparent | Fully exempt | 0% |
| Class C | Sibling, son-in-law, daughter-in-law | $25,000 | 11% to $1,075,000 of taxable value, 13% to $1,375,000, 14% to $1,675,000, 16% above |
| Class D | Everyone else — niece, nephew, cousin, friend, unrelated | None | 15% on the first $700,000 of taxable value, 16% above |
New Jersey’s Class D is the harshest bracket among the five states: no exemption at all, and a 15% starting rate for a beneficiary who is, say, a lifelong friend or unmarried partner rather than a blood relative.
Worked Example 1 — Pennsylvania Sibling
A sister inherits $250,000 from her late brother’s estate. Pennsylvania gives siblings no exemption and applies a flat 12% rate.
| Item | Amount |
|---|---|
| Inheritance | $250,000 |
| Exemption | $0 |
| Taxable amount | $250,000 |
| Rate | 12% (flat) |
| Inheritance tax owed | $30,000 |
| Net inheritance | $220,000 |
| Effective rate | 12.0% |
If she pays within three months of her brother’s death, the 5% discount cuts the bill to $28,500 — worth calendaring the payment date, not just the nine-month due date.
Worked Example 2 — New Jersey Class C Beneficiary
A brother inherits the same $250,000 from his late sister’s estate, but in New Jersey. Siblings fall into New Jersey’s Class C, which gets a $25,000 exemption before the graduated rate applies.
| Item | Amount |
|---|---|
| Inheritance | $250,000 |
| Exemption (Class C) | $25,000 |
| Taxable amount | $225,000 |
| Rate | 11% (entire taxable amount falls in the first bracket, under $1,075,000) |
| Inheritance tax owed | $24,750 |
| Net inheritance | $225,250 |
| Effective rate | 9.9% |
Same relationship, same dollar amount, two states — a $5,250 difference in tax, purely from which state’s law governs the transfer (generally the decedent’s state of residence, or the state where real property is located).
Worked Example 3 — Maryland Collateral Heir
A niece inherits $50,000 from her aunt in Maryland. Nieces and nephews fall into Maryland’s “collateral heir” class: a $1,000 exemption, then a flat 10%.
| Item | Amount |
|---|---|
| Inheritance | $50,000 |
| Exemption | $1,000 |
| Taxable amount | $49,000 |
| Rate | 10% (flat) |
| Inheritance tax owed | $4,900 |
| Net inheritance | $45,100 |
If the aunt’s total estate also exceeded Maryland’s separate estate tax exemption, the estate itself could owe Maryland estate tax before this $50,000 was even distributed — the one scenario nationwide where both taxes stack on the same transfer.
Run your own numbers — including which relationship class applies to you — with the Inheritance Tax Calculator.
Iowa: Fully Repealed as of 2025
Iowa used to be the sixth state on this list. The legislature phased the tax out gradually — deaths in 2021 were taxed at 80% of the pre-2021 rate, 2022 at 60%, 2023 at 40%, and 2024 at 20% — before eliminating it completely for deaths on or after January 1, 2025. Any Iowa death from 2025 onward owes $0 inheritance tax regardless of relationship or amount. Iowa has no estate tax either, so there is currently no state-level transfer tax in Iowa at all. If you’re researching “Iowa inheritance tax” from an older article or forum post, that information is stale — the tax no longer exists.
States With No Inheritance Tax
The other 45 states plus the District of Columbia do not tax beneficiaries on what they inherit at all — this includes every state not listed above, whether or not that state has its own separate estate tax (12 states plus DC do; see the Estate Tax Calculator for that separate question). Inheriting cash, property, or investments from a resident of any of those states triggers no state-level inheritance tax, though the estate itself may still owe state estate tax or federal estate tax depending on its size, and any capital gains realized later when you eventually sell inherited assets are a separate matter entirely (generally softened by the stepped-up basis at death).
How This Interacts With the Federal Estate Tax
State inheritance tax and federal estate tax are entirely separate systems that can both apply to the same death — or neither may apply at all:
- Federal estate tax is assessed on the estate before distribution, and only above a very high threshold: $15,000,000 per individual in 2026 (permanent under the One Big Beautiful Bill Act, indexed for inflation thereafter), effectively $30,000,000 for a married couple using portability. The vast majority of estates — and virtually all estates below the exemption — owe $0 federal estate tax.
- State inheritance tax (KY, MD, NE, NJ, PA) applies to the heir, has nothing to do with the size of the overall estate, and in Pennsylvania and New Jersey’s Class D, can apply starting at the very first dollar.
That means a modest $50,000 inheritance from a Pennsylvania aunt to a niece can trigger real inheritance tax while a $10 million estate passing entirely to a spouse and children in Nebraska or New Jersey can trigger $0 in either state or federal tax — the relationship class, not the estate’s total size, is what state inheritance tax cares about. See Estate Tax 2026: OBBBA’s $15M Permanent Exemption for the full federal picture.
Related Reading
- Estate Tax 2026: OBBBA’s $15M Permanent Exemption Replaces the TCJA Sunset — the federal exemption that applies to the estate itself, separate from state inheritance tax
- Estate Planning Tax Basics — how wills, trusts, and beneficiary designations interact with both estate and inheritance tax
- Gift Tax Annual Exclusion Guide — lifetime gifting as a way to reduce a future taxable estate before death
FAQs
Does the state where I live tax my inheritance, or the state where the deceased person lived?
Generally, the decedent’s state of residence (or the state where real property is physically located) governs whether inheritance tax applies — not where the heir lives. A California resident who inherits from a Pennsylvania relative can still owe Pennsylvania inheritance tax, even though California itself has no inheritance tax.
If I inherit from a spouse, do I ever owe inheritance tax?
No. All five states that impose an inheritance tax (Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania) fully exempt a surviving spouse, including jointly-held spousal property in Pennsylvania and registered domestic partners in Maryland and New Jersey.
Is inheritance tax the same as estate tax?
No. Estate tax is charged to the estate before assets are distributed (federal government plus 12 states and DC). Inheritance tax is charged to the individual beneficiary after they receive assets, and only exists in Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is the only state that charges both on the same estate.
I saw old numbers for Iowa inheritance tax online — are they still accurate?
No. Iowa fully repealed its inheritance tax for deaths on or after January 1, 2025, after phasing the rate down each year from 2021 through 2024. Any deaths in Iowa from 2025 onward owe $0 inheritance tax regardless of relationship, so pre-2025 rate tables you may find elsewhere are no longer in effect.
Does inherited property get taxed again when I sell it?
Not by inheritance tax — that’s a one-time tax on the transfer itself. But when you later sell inherited property (a house, stock, etc.), any gain above your basis is subject to capital gains tax. Inherited assets generally receive a stepped-up basis to fair market value at the date of death, which usually minimizes — but doesn’t eliminate — that future capital gains exposure.