States With Inheritance Tax: Which Heirs Owe Up to 16%

ℹ️ Financial Disclaimer: This article covers estate tax, inheritance tax and estate planning for educational purposes only. It is not personalized tax, legal or financial advice. Tax rules depend on the date of death, the state and each heir’s relationship to the person who died. Consult a CPA or an estate attorney licensed in the relevant state before acting.

Estate tax vs inheritance tax: which states charge heirs

The difference comes down to who pays the bill.

Who pays each tax

An estate tax is charged on the whole estate and paid before anything is distributed. An inheritance tax is charged separately on each heir’s share, and the rate depends on how closely that heir was related to the person who died.

🔍 How It Works: If one bill is calculated on everything the person left, it’s an estate tax. If each person who inherits gets their own calculation, it’s an inheritance tax. Maryland is the only state that charges both.

The five states that tax heirs in 2026

Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. Iowa’s inheritance tax ended for deaths on or after January 1, 2025, though some online tables still list it.

Whose state rules apply

The rules follow the person who died, not the heir. Kentucky, for example, taxes a resident’s property (except out-of-state real estate) and Kentucky property owned by nonresidents. That means an heir living in Florida can still owe.

Inheritance tax rates in the five states

Each state sorts heirs into classes, and the class sets the inheritance tax rate.

Pennsylvania

Spouses pay 0%, as do transfers between a parent and a child 21 or younger. Children, grandchildren and parents pay 4.5%, siblings pay 12%, and everyone else pays 15%.

New Jersey

Class A heirs (spouses, children, grandchildren, parents, stepchildren) are exempt. Siblings and children-in-law get $25,000 tax-free, then pay 11% rising to 16%. Everyone else pays 15% up to $700,000 and 16% above that.

Kentucky

Spouses, parents, children, grandchildren and siblings are exempt. Nieces, nephews, aunts, uncles and in-laws pay 4% to 16% after $1,000. Everyone else pays 6% to 16% after $500.

Nebraska

Spouses and heirs under 22 are exempt. Close relatives, including siblings, pay 1% above $100,000. Nieces, nephews, aunts and uncles pay 11% above $40,000, and everyone else pays 15% above $25,000.

Maryland

Close family, including siblings, is exempt. Other heirs pay a flat 10%, and the first $1,000 to each person is exempt.

⚠️ Costly Mistake: Some widely shared tables still quote Nebraska’s pre-2023 rates of 13% and 18%. The rules in effect on the date of death decide the bill, so match the rate to that date.

Do children, siblings or friends pay inheritance tax?

Your relationship to the decedent matters more than the size of the estate. Spouses are exempt in all five states.

States with inheritance tax comparison showing how a spouse, child, sibling, niece, and unrelated friend can face different inheritance tax outcomes — In states with inheritance tax, the heir’s relationship to the person who died can affect exemptions, thresholds, and tax rates.

State	Child	Sibling	Niece or nephew	Unrelated heir
Kentucky	Exempt	Exempt	4–16% after $1,000	6–16% after $500
Maryland	Exempt	Exempt	10% after $1,000	10% after $1,000
Nebraska	1% over $100,000 (exempt under 22)	1% over $100,000	11% over $40,000	15% over $25,000
New Jersey	Exempt	11–16% after $25,000	15–16%	15–16%
Pennsylvania	4.5% (0% if 21 or younger)	12%	15%	15%

Sources: Kentucky, Nebraska, New Jersey, Pennsylvania and Maryland tax agencies and statutes, checked September 2026.

Spouses and children

Children owe nothing in three states. Pennsylvania charges them 4.5% from the first dollar.

Siblings

Siblings range from fully exempt in Kentucky and Maryland to 12% in Pennsylvania.

Nieces, nephews and friends

These heirs pay the highest rates everywhere, often 10% to 16%.

Worked example: $150,000 to a sibling

🔍 How It Works: Here is one $150,000 inheritance, before deductions such as debts and funeral costs.
Kentucky: $0
Maryland: $0
Nebraska: 1% × $50,000 = $500
New Jersey: 11% × $125,000 = $13,750
Pennsylvania: 12% × $150,000 = $18,000, or $17,100 if paid within three months

Which states have an estate tax and their 2026 limits

Twelve states and DC tax estates, many far below the federal line.

States with inheritance tax and estate tax rules illustrated through a lower state estate tax threshold and a higher federal estate tax threshold — An estate can fall below the federal estate-tax exemption yet still cross a much lower state estate-tax threshold.

Federal exemption for 2026

📊 Data Point: Estates of people who die in 2026 can pass $15,000,000 free of federal estate tax, up from $13,990,000 for 2025 deaths. Source: the IRS’s 2026 inflation adjustments (IRS, October 2025).

See who actually pays estate tax for how the federal tax works.

Lowest state thresholds

Oregon starts at $1,000,000, followed by Rhode Island and Massachusetts at about $2 million or less.

State	2026 exemption	Top rate	Key detail
Oregon	$1,000,000	16%	Not indexed
Rhode Island	$1,838,056	16%	Indexed yearly
Massachusetts	$2,000,000	16%	Not indexed
Minnesota	$3,000,000	16%	3-year gift add-back
Washington	$3,076,000 (Jan–Jun) / $3,000,000 (Jul–Dec)	35% / 20%	Date of death decides
Illinois	$4,000,000	16%	Not indexed
District of Columbia	$4,988,400	16%	—
Maryland	$5,000,000	16%	Also has inheritance tax
Vermont	$5,000,000	16%	2-year gift add-back
Hawaii	$5,490,000	20%	Portability by election
Maine	$7,160,000	12%	1-year gift add-back
New York	$7,350,000	16%	105% cliff
Connecticut	$15,000,000	12%	Matches federal

Sources: each state’s tax agency or statute, checked September 2026.

Washington’s mid-year change

For deaths through June 30, 2026, Washington’s exclusion is $3,076,000 with a 35% top rate. For deaths on or after July 1, 2026, it’s $3,000,000 with a 20% top rate.

New York’s cliff

🔍 How It Works: If a New York estate exceeds 105% of $7,350,000 ($7,717,500), the exemption disappears and the entire estate is taxed.

Compare the federal numbers in our 2026 estate tax exemption guide.

✅ Action Step: Ask an estate attorney licensed in your state: “Will my estate, including my home and retirement accounts, cross this state’s threshold, and does the state allow portability between spouses?”

What to do if an inheritance tax bill is due

The executor usually files the return and pays the inheritance tax from the estate before distributing shares.

Filing deadlines by state

In Pennsylvania, the return is due nine months after death. Nebraska’s tax is due within one year. New Jersey’s is due within eight months.

Early-payment discounts

Pennsylvania takes 5% off tax paid within three months of death. Kentucky allows 5% off tax paid within nine months.

Who files the return

In Pennsylvania, if no executor is named, the person receiving the property files.

✅ Action Step: Ask a CPA or a qualified estate planning attorney: “Does the estate have enough cash to pay early and take the discount?”

Common inheritance and estate tax traps

Assets outside the will can still be taxed

Skipping probate doesn’t mean skipping tax. In Pennsylvania, jointly held assets with someone other than a spouse are generally taxable. See the assets that pass outside a will.

No state portability

New York, Washington, Connecticut, Massachusetts and most other estate-tax states don’t let a surviving spouse use the unused state exemption. Maryland and Hawaii allow it by timely election. Our estate planning checklist lists what to review with an attorney.

Frequently asked questions

1. Which states have inheritance tax in 2026?

Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania are the states with inheritance tax. Iowa’s inheritance tax ended for deaths from January 2025. A CPA can confirm what applies to you.

2. Is there a federal inheritance tax?

No. There’s no federal inheritance tax; the federal estate tax applies only to estates above $15,000,000 for 2026 deaths. Confirm your situation with a CPA.

3. Does the heir’s state or the decedent’s state decide inheritance tax?

The decedent’s state decides inheritance tax, along with where their real estate sits. An out-of-state heir can still owe. An estate attorney can confirm which state applies.

4. Do children pay inheritance tax?

Children pay no inheritance tax in Kentucky, Maryland or New Jersey. They pay 1% above $100,000 in Nebraska and 4.5% in Pennsylvania. Ask a CPA about your share.

5. Do siblings pay inheritance tax?

Siblings are exempt from inheritance tax in Kentucky and Maryland. They pay 1% above $100,000 in Nebraska, 11% after $25,000 in New Jersey, and 12% in Pennsylvania. Confirm with a CPA.

6. How much is Pennsylvania inheritance tax?

Pennsylvania inheritance tax is 0% for spouses, 4.5% for children and parents, 12% for siblings and 15% for other heirs. A CPA can check your class.

7. Which state has the lowest estate tax exemption?

Oregon has the lowest estate tax exemption at $1,000,000, followed by Rhode Island and Massachusetts. An estate attorney can review your exposure.

8. What is the federal estate tax exemption for 2026?

The federal estate tax exemption is $15,000,000 per person for 2026 deaths, up from $13,990,000 in 2025. Confirm planning details with an estate attorney.

9. What is New York’s estate tax cliff?

Under New York’s estate tax cliff, an estate above $7,717,500 (105% of $7,350,000) loses its exemption and is taxed in full. An estate attorney can model this.

10. Can inheritance tax be paid early for a discount?

Yes. Pennsylvania cuts inheritance tax 5% if it’s paid within three months, and Kentucky cuts it 5% if paid within nine months. Ask the estate’s CPA about timing.

11. Is jointly owned property subject to inheritance tax in Pennsylvania?

Property jointly owned by spouses is exempt from Pennsylvania inheritance tax, but assets held jointly with anyone else are generally taxable. Confirm with a Pennsylvania estate attorney.

The three facts that decide what you owe

Three things decide whether any tax is due: where the person who died lived or owned property, your relationship to them, and the date of death. Check all three against the tables above. If a bill looks likely, bring these questions to a CPA or estate attorney before any money is distributed.

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Sameer Patel — Founder & Editor

Research, drafting and original analysis

Contributor at Finance Authority Hub.

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The content on Finance Authority Hub is provided for general informational and educational purposes only and should not be considered personalized financial, investment, tax, legal, or professional advice. Financial decisions depend on your individual goals, income, risk tolerance, location, and regulatory situation. Before acting on any information, strategy, estimate, or calculator result, consult a qualified licensed professional who can evaluate your specific circumstances.

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