Estate Tax and Inheritance Tax

Information on estate and inheritance tax

Last updated: 10 November 2016

Be aware that tax laws can change frequently. For advice with current tax laws, consult an attorney or accountant. If you are at all unsure of what taxes you are required to pay, it is recommended to seek legal advice.

Federal estate taxes

If the estate is valued above a certain threshold, you will need to pay federal estate taxes. In 2016 this threshold is $5,450,000. If the estate, with all its assets, property and money, does not add up to more than this threshold, you will not have to pay any federal estate tax.

State estate taxes

In addition to federal estate taxes, you may have to pay state estate taxes. However, only some states require you to pay state estate tax. These are: Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Tennessee, Vermont and Washington.

Each of these states has an exemption threshold, and this can vary greatly. In New Jersey, for example, you are only liable to pay estate state tax if the estate is valued at over $675,000. In Delaware the threshold is $5,430,000.

If the person who has died did not live in or own property in any of these states, you do not have to pay state estate taxes on your inheritance – even if you do live in one of these states.

State inheritance tax

Inheritance tax only applies in six states: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. If the estate does not have assets in any of these six states, you do not have to pay tax on inheritance.

Furthermore, in these six states you will be exempt from inheritance tax if the property is passing to a surviving spouse of the person who has died.

For further information on tax on inheritance, consult the IRS website or speak to a qualified attorney.