State Estate &
Inheritance Taxes
An estate can owe no federal estate tax and still owe state estate tax. Twelve states and DC tax estates, some starting at $1 million, and five states tax what beneficiaries inherit.
Last reviewed
No federal estate tax does not mean no estate tax
The federal estate tax exemption is $15 million per person in 2026, so very few families owe federal estate tax. But twelve states and the District of Columbia have their own estate tax, and most start far lower. An estate worth $3 million owes nothing federally but can owe significant state estate tax in Oregon or Massachusetts.
State estate tax exemptions vs. the federal $15 million
Which state’s tax applies
Two things decide it: the state where the person lived when they died, and any state where they owned real estate or other physical property. If they lived in a state with an estate tax, the estate is generally taxed there. If they owned a house or land in another state that has one, that state can tax the property too, even if the person lived somewhere with no estate tax at all.
A few rules that catch families by surprise
- New York’s cliff: an estate just over the $7.35 million exemption does not pay tax only on the excess. Above 105% of the exemption, the entire estate is taxed.
- Married couples: most states do not let a surviving spouse use the unused exemption of the spouse who died (only Hawaii and Maryland do). If the trust or will creates a separate trust at the first death, funding it correctly is what protects the second estate.
- Gifts before death: some states, including New York and Minnesota, add back gifts made in the last few years of life.
- Property transfers can wait on the state: some states require the tax to be cleared before real estate or accounts can be transferred to heirs.
Inheritance taxes
Five states charge an inheritance tax instead of, or in Maryland’s case in addition to, an estate tax. It is based on what each beneficiary receives and their relationship to the person who died. The executor usually files the return and pays the tax out of that beneficiary’s share.
What each beneficiary owes, by relationship
| State | Spouse | Children and grandchildren | Siblings | Others |
|---|---|---|---|---|
| Kentucky | Exempt | Exempt | Exempt | 4% to 16% (nieces, nephews, in-laws); 6% to 16% (others) |
| Maryland | Exempt | Exempt | Exempt | 10% |
| Nebraska | Exempt | 1% above $100,000 | 1% above $100,000 | 11% above $40,000 (aunts, uncles, nieces, nephews); 15% above $25,000 (others) |
| New Jersey | Exempt | Exempt | 11% to 16% above $25,000 | 15% to 16% |
| Pennsylvania | 0% | 4.5% | 12% | 15% |
What we handle
- Figuring out which states can tax the estate
- State estate tax and inheritance tax returns
- Coordinating the state returns with the federal filing, if one is required
- Advising on trusts created at the first spouse’s death
- State tax releases needed to transfer property to heirs
Frequently Asked Questions
Does my state have an estate tax?
Twelve states and the District of Columbia have an estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. Five states have an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. What matters is the state where the person who died lived, plus any state where they owned real estate.
What is the difference between an estate tax and an inheritance tax?
An estate tax is charged on the estate as a whole before anything is distributed, based on the total value. An inheritance tax is charged on what each beneficiary receives, and the rate depends on their relationship to the person who died. Spouses are exempt in every inheritance tax state, and children are exempt in most of them.
Can an estate owe state estate tax but no federal estate tax?
Yes, and it is common. The federal exemption is $15 million in 2026, but Oregon taxes estates over $1 million, Massachusetts over $2 million, and several other states between $3 million and $7.35 million. A state return may be required even when no federal return is.
What if the person owned property in another state?
Real estate and other physical property are generally taxed by the state where they are located. Someone who lived in Florida but kept a vacation home in Maine or Massachusetts can owe estate tax to that state even though Florida has none. That usually means a separate filing in the other state.