Estate Tax and Inheritance Tax by State (2026)

For the full state income tax comparison and relocation planning framework, see the State Taxes hub.

Most Americans will never owe federal estate tax — the exemption is $15 million per individual in 2026, and the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, made this level permanent (previously it was scheduled to roughly halve after 2025). But 12 states plus D.C. impose their own estate taxes, and 5 states impose an inheritance tax, with much lower thresholds than the federal level — those state-level taxes catch far more families than most people realize. If you own a home in Massachusetts, Oregon, or Washington state, an estate worth just $1–2 million could trigger a state tax bill your heirs didn’t see coming.

Understanding how federal and state estate taxes interact — and what planning steps can reduce or eliminate them — is one of the most consequential parts of estate planning. This guide covers the current federal rules, every state with an estate or inheritance tax, and practical strategies for protecting what you pass on.

Federal Estate Tax

The federal estate tax applies only to the portion of an estate that exceeds the exemption. With the exemption at $15 million for individuals — and $30 million for married couples who use portability — the overwhelming majority of estates owe no federal tax at all.

This exemption level is now permanent. Before the One Big Beautiful Bill Act (OBBBA) was signed on July 4, 2025, the Tax Cuts and Jobs Act’s doubled exemption was scheduled to expire after 2025, which would have cut the exemption roughly in half. OBBBA removed that sunset and set the exemption at $15 million for 2026, indexed for inflation in future years starting from that base. If you previously delayed estate planning because of the expiring-exemption deadline, that specific deadline no longer applies — though state-level exemptions (see below) are often much lower and still warrant planning.

Federal Estate Tax Brackets

These rates apply only to the taxable amount above the exemption. The brackets are progressive — the first $10,000 above the exemption is taxed at 18%, the next $10,000 at 20%, and so on. In practice, the effective tax rate on a taxable estate of $1 million above the exemption works out below the 40% top marginal rate because of the graduated brackets.

It’s also worth noting that the estate tax and the gift tax share a unified lifetime exemption. Any taxable gifts you make during your lifetime reduce the exemption available at death dollar-for-dollar, so the two taxes function as a single system.

States With an Estate Tax

Twelve states and Washington D.C. impose their own estate tax, often with much lower exemptions than the federal level. These state taxes are separate from and in addition to the federal estate tax, meaning a large estate in one of these states could face both bills.

Important: State estate tax exemptions below reflect the last confirmed figures available and several states index their exemption for inflation annually. Confirm the current-year exemption with each state’s tax authority before relying on a specific number for planning purposes — these figures were not independently re-verified against each state’s official 2026 guidance this session, unlike the federal figure above.

Oregon and Massachusetts have historically had the lowest exemptions among these states, meaning estates worth over $1–2 million can owe state estate tax despite being well below the federal threshold. In expensive real estate markets like the Boston metro area or Portland, it doesn’t take much — a paid-off house plus retirement accounts can easily push past $1 million.

A few important nuances:

• Connecticut ties its exemption to the federal level by statute, so it should move to the new $15 million federal figure for 2026 — confirm this with the Connecticut Department of Revenue Services before relying on it.
• New York has historically applied a “cliff” — if the estate exceeds the exemption by more than 5%, the entire estate becomes taxable, not just the excess. Confirm this rule and the current exemption amount are still in effect before planning around it.
• Hawaii and Washington have historically had the highest top rates among these states, at 20%.
• Oregon’s exemption has historically not been adjusted for inflation, pulling in more estates each year as home values rise — confirm the current status.

If you live in a state with an estate tax and your net worth approaches the exemption, consult a local estate planning attorney for current, state-specific figures. Moving assets into certain types of trusts — particularly irrevocable trusts — before they appreciate further can be one of the most effective strategies.

States With an Inheritance Tax

As of 2026, five states impose an inheritance tax, paid by the person receiving the inheritance:

Maryland is the only state with both an estate tax AND an inheritance tax, which means an estate there can be taxed twice — once when the estate is settled, and again when beneficiaries receive their share. However, Maryland does allow a credit that partially offsets the double hit.

Most inheritance taxes exempt spouses and often children, meaning they primarily affect inheritances left to siblings, nieces/nephews, friends, and unrelated individuals. The distinction matters for beneficiary designations — naming a spouse or child on retirement accounts, life insurance, and transfer-on-death accounts keeps those assets out of the inheritance tax net in most states.

Iowa repealed its inheritance tax effective January 1, 2025, so it no longer applies to estates of decedents dying in 2025 or later, and Iowa is no longer counted among current inheritance-tax states.

Nebraska has historically had among the harshest rates for non-family heirs on inheritances to unrelated individuals — confirm current rates and exemption amounts if you live in Nebraska and plan to leave assets to a non-relative; a living trust or other planning vehicle can help reduce the tax exposure.

States With No Estate Tax or Inheritance Tax

The remaining states impose neither an estate tax nor an inheritance tax. Notable no-tax states include Florida, Texas, Nevada, Wyoming, and Tennessee. This is one reason retirees frequently relocate to states with no income tax that also lack estate taxes — the combined savings across income, estate, and inheritance taxes can be substantial.

Estate Tax Planning Strategies

Estate tax planning isn’t just for the ultra-wealthy. If you live in a state with a $1–5 million exemption, these strategies remain relevant for a much broader group of households than the federal exemption alone would suggest. The key principle: remove assets from your taxable estate before they appreciate further. The earlier you start, the more effective these tools become.

1. Annual Gift Exclusion

Give up to $19,000 per recipient per year (2025/2026 figure — confirm the current-year amount, as the IRS adjusts it periodically) without using any of your lifetime estate tax exemption. A married couple can give double that amount to each person annually. This is one of the simplest and most accessible strategies and can be done without an attorney.

2. Spousal Transfer and Portability

Unlimited transfers between spouses are estate-tax-free under the unlimited marital deduction. When the first spouse dies, the surviving spouse can elect to use the deceased spouse’s unused exemption — a concept called portability. This effectively doubles the federal exemption to $30 million for the surviving spouse in 2026. However, portability must be elected by filing an estate tax return (Form 706) even if no tax is owed, and it does not apply to the generation-skipping transfer tax. Work with a CPA or estate attorney to ensure this election is properly filed.

3. Irrevocable Life Insurance Trust (ILIT)

Life insurance proceeds are included in your taxable estate if you own the policy. In a state with a low state estate tax exemption, even a moderate life insurance policy could push an estate over that state’s threshold. An ILIT removes the policy from your estate while still providing liquidity for heirs to pay estate taxes, funeral costs, and other expenses without having to sell illiquid assets like real estate or a business.

4. Charitable Giving

Assets donated to qualified charities are deducted from the taxable estate. A charitable remainder trust (CRT) provides income to you or your spouse during your lifetime and transfers the remainder to charity at death — reducing the estate while generating a current income tax deduction. For high-net-worth households already making charitable donations, structuring gifts through a CRT or donor-advised fund is often more tax-efficient than outright bequests.

5. Grantor Retained Annuity Trust (GRAT)

Transfer appreciating assets — such as stock, a business interest, or real estate investments — into a trust while retaining an annuity payment for a fixed term. If the assets grow faster than the IRS Section 7520 interest rate (which is set monthly), the excess appreciation passes to your heirs completely free of gift and estate tax. GRATs are particularly effective in low-interest-rate environments and with volatile, high-growth assets.

6. Move to a No-Estate-Tax State

Relocating to a state without an estate tax can save a substantial amount for households with estates above the state exemption threshold. This is particularly relevant if you live in Oregon, Massachusetts, or Washington state, which have historically had among the lowest state exemptions. However, states like New York have aggressive “domicile audits” to ensure the move is genuine — simply buying a Florida condo isn’t enough. You’ll typically need to change your driver’s license, voter registration, doctors, and spend the majority of your time in the new state.

7. Family Limited Partnership (FLP) or LLC

Transferring assets into a family limited partnership or LLC allows you to gift minority interests to heirs at a discount to fair market value. Because minority interests lack control and marketability, they can be valued meaningfully below their proportionate share of the underlying assets. This is an advanced strategy that requires proper structuring and an independent appraisal, but it can be highly effective for families with real estate, a business, or a concentrated investment portfolio.

Gift Tax Rules

The gift tax is connected to the estate tax — they share the same unified lifetime exemption:

Gifts exceeding the annual exclusion don’t necessarily trigger tax — they simply reduce your lifetime exemption. You report them on IRS Form 709, but you only owe gift tax if you’ve exhausted the entire lifetime exemption. In practice, the gift tax functions as a guardrail to prevent people from simply giving away their estate before death to avoid estate tax.

Two important exceptions that don’t count against either the annual exclusion or the lifetime exemption:

• Tuition payments made directly to an educational institution (not to the student)
• Medical expenses paid directly to the healthcare provider

These “qualified transfers” are unlimited and are a powerful way to support family members without any gift or estate tax consequences.

Step-Up in Basis at Death

One of the most significant tax benefits in estate planning: inherited assets receive a stepped-up basis to fair market value at the date of death. This eliminates all unrealized capital gains that accumulated during the decedent’s lifetime.

Example: You bought stock for $50,000 that’s worth $500,000 when you die. Your heirs receive a basis of $500,000. If they sell immediately, they owe $0 in capital gains tax despite $450,000 in appreciation.

The step-up applies to stocks, bonds, mutual funds, ETFs, real estate, and most other capital assets. It does not apply to assets in traditional IRAs, 401(k)s, or other tax-deferred retirement accounts — those are taxed as ordinary income when withdrawn by the beneficiary regardless.

This is why many advisors recommend holding appreciated assets until death rather than selling or gifting them during your lifetime. Gifting appreciated assets transfers your original cost basis to the recipient (a “carryover basis”), which means they’d owe capital gains tax on the full appreciation when they eventually sell. In contrast, bequeathing the same asset at death wipes out the gain entirely.

For families with significant unrealized gains, the step-up in basis can save more in taxes than the estate tax itself costs — making it a central consideration in deciding whether to gift assets during life or hold them.

How Estate Tax Interacts With Other Taxes

Estate and inheritance taxes don’t exist in a vacuum. Here’s how they connect with other parts of the tax code:

• Income tax on inherited retirement accounts: Assets in a 401(k) or traditional IRA are subject to income tax when withdrawn by the beneficiary. Non-spouse beneficiaries must generally empty the account within 10 years under the SECURE Act, which can push heirs into higher tax brackets.
• Capital gains on inherited real estate: Thanks to the step-up in basis, heirs can often sell inherited property with little or no capital gains tax. But if they hold it and it appreciates further, the new gains are taxable. Review capital gains tax on real estate for details.
• State income tax: Some states tax inherited retirement account distributions at their full state income tax rate. Moving to a no-income-tax state before taking distributions can save a significant amount.
• Generation-skipping transfer tax (GSTT): Transfers to grandchildren or later generations (skipping a generation) face a separate 40% tax on top of the estate tax. The GSTT has its own exemption, which now tracks the $15 million federal estate tax exemption for 2026, but unlike the estate tax exemption, it is not portable between spouses.

When to Start Estate Tax Planning

The right time to think about estate taxes depends on your net worth and where you live:

• Under $1 million: Federal and state estate taxes are unlikely to apply in any state. Focus on basic estate planning documents — a will, power of attorney, and beneficiary designations.
• $1–5 million: If you live in a state with an estate tax — particularly Oregon, Massachusetts, Rhode Island, or Washington, which have historically had lower exemptions — you may be approaching or past the state exemption. Consult an estate planning attorney about trusts and gifting strategies.
• $5–15 million: You’re likely above many state exemptions even though you’re below the $15 million federal exemption. This is the range where proactive planning — GRATs, ILITs, family LLCs — can still save substantial state-level tax.
• Over $15 million: Federal estate tax planning becomes essential. Work with a team that includes an estate attorney, a CPA, and potentially a financial advisor experienced in tax-efficient investing.

Regardless of your net worth, having a basic estate planning checklist ensures your assets go where you intend and your family avoids probate delays.

Related: Top 1% Net Worth | Net Worth Percentile Calculator | Capital Gains Tax Rates | 2026 Tax Changes | How to Write a Will

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.