What Is Inheritance Tax?

An inheritance tax is a tax imposed by some states on the recipients of inherited assets. In contrast to an estate tax, an inheritance tax is paid by the recipient of a bequest rather than the estate of the deceased.



The inheritance tax is not common in the U.S. In fact, just six states have an inheritance tax as of 2023, and the taxation depends on the state in which the deceased lived or owned property, the value of the inheritance, and the beneficiary's relationship to the decedent. Taxes for 2022 are paid in 2023.

Inheritance Tax Thresholds

• In Iowa, if the estate is valued at less than $25,000 then no tax is due when property passes to the recipients.9
  
  
• In Maryland, inheritances from estates smaller than $50,000 are also exempt.10
  
  

• Iowa: Spouses, lineal ascendants (parents, grandparents, and great-grandparents), and lineal descendants (children, stepchildren, grandchildren, and great-grandchildren) are exempt; charities exempt up to $500. The tax rate on others ranges from 3% to 9% of inheritance in 2022.9
  
  
• Kentucky: Immediate family members (spouses, parents, children, siblings) are exempt; other recipients exempt up to $500 or $1,000. The tax is on a sliding scale based on the size of inheritance and includes a minimum amount, plus a percentage ranging from 4% to 16%.11
  
  
• Maryland: Immediate family (parents, grandparents, spouses, children, grandchildren, siblings) and charities exempt; other recipients exempt up to $1,000. The tax rate is 10%.10
  
  
• Nebraska: Spouses and charities fully exempt;12 immediate family (parents, grandparents, siblings, children, grandchildren) exempt up to $40,000 (rising to $100,000 in 2023). Other relatives are exempt up to $15,000 ($40,000 in 2023) and unrelated heirs up to $10,000 ($25,000 in 2023). Prior to 2023, the tax rates above those exemptions are 1%, 13%, and 18%, respectively. Starting in 2023, those rates rise to 1%, 11%, and 15%, respectively.131415
  
  
  
• New Jersey: Immediate family (spouse, children, parents, grandparents, grandchildren) and charitable organizations exempt. Siblings and sons/daughters-in-law exempt up to $25,000. The tax rate ranges from 11% to 16%, depending on the size of inheritance and the familial relationship.56
  
  
• Pennsylvania: Spouse and minor children exempt. Adult children, grandparents, and parents are exempt up to $3,500. The tax rate is 4.5%, 12%, or 15%, depending on the relationship.16