Which States Have an Inheritance Tax in 2026?

The short answer: five states impose an inheritance tax in 2026: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa’s inheritance tax ended for deaths on or after January 1, 2025. There is no federal inheritance tax. In every one of the five states, a surviving spouse pays nothing, and in four of them children pay nothing either; the tax falls on siblings, nieces and nephews, friends, and unmarried partners. Twelve other states and the District of Columbia have an estate tax instead, which is a different tax paid by the estate rather than the heir, and Maryland has both.

For our clients the state that matters most is New Jersey, which repealed its estate tax in 2018 but kept an inheritance tax that reaches 11 to 16 percent on transfers to anyone outside the immediate family. This article lists every state’s rules, explains how New Jersey’s tax and its waiver system work, and describes what New York and Connecticut residents face instead.

FREE WEBINAR

5 Things to Know About

Estate Planning

When You Turn Sixty-Five

Save the Date

Friday, Oct 9^th at 2:30pm

What Is the Difference Between an Inheritance Tax and an Estate Tax?

Both are taxes triggered by death, but they are measured and paid differently.

An estate tax is imposed on the estate as a whole, calculated on its total value above an exemption, and paid by the executor before anything is distributed. Who inherits does not change the tax, except that transfers to a spouse and to charity are generally deductible. The federal government imposes an estate tax with a basic exclusion of 15 million dollars per person for deaths in 2026, so very few estates pay it.

An inheritance tax is imposed on each beneficiary’s share, at a rate that depends on how closely the beneficiary was related to the deceased. The estate’s total value matters little. A 10-million-dollar estate left entirely to a spouse and children owes no New Jersey inheritance tax, while a 100,000-dollar estate left to a niece does.

The two taxes can overlap. Maryland imposes both. A New York resident who leaves New Jersey real estate to a nephew may owe New York estate tax and New Jersey inheritance tax on the same property.

Which States Have an Inheritance Tax in 2026?

Kentucky. Class A beneficiaries, meaning the spouse, parents, children, grandchildren, and siblings including half-siblings, are exempt. Class B, which includes nieces and nephews, sons- and daughters-in-law, aunts, uncles, and great-grandchildren, receives a 1,000-dollar exemption and pays 4 to 16 percent. Class C, everyone else, receives a 500-dollar exemption and pays 6 to 16 percent. The return is due 18 months after death, and a 5 percent discount applies if the tax is paid within nine months.

Maryland. The rate is a flat 10 percent. Property passing to a spouse, parent, grandparent, sibling, stepparent, stepchild, child or other lineal descendant, or the spouse of a child or other lineal descendant is exempt. Nieces, nephews, cousins, aunts, uncles, friends, and unmarried partners pay the tax. Maryland also imposes an estate tax on estates above 5 million dollars, at rates up to 16 percent, and is the only state with both.

Nebraska. Nebraska’s tax is collected at the county level under state law. For deaths on or after January 1, 2023, the surviving spouse and any beneficiary under age 22 are exempt. Immediate relatives, including parents, grandparents, siblings, children, and adopted children, pay 1 percent on amounts above 100,000 dollars. Remote relatives, including aunts, uncles, nieces, nephews, and their spouses, pay 11 percent above 40,000 dollars. Everyone else pays 15 percent above 25,000 dollars. A 2026 amendment took effect on July 18, 2026 without changing these rates or thresholds.

New Jersey. Described in detail below. Class A beneficiaries are exempt; Class C pays 11 to 16 percent after a 25,000-dollar exemption; Class D pays 15 to 16 percent; charities and government bodies in Class E are exempt.

Pennsylvania. Transfers to a surviving spouse, and from a child aged 21 or younger to a parent, are taxed at 0 percent. Transfers to direct descendants and lineal heirs pay 4.5 percent, to siblings 12 percent, and to other heirs 15 percent, with charities and exempt institutions paying nothing. The tax is due at death and becomes delinquent nine months later, and a 5 percent discount applies if it is paid within three months of death. Pennsylvania is unusual in taxing children at all; most inheritance tax states exempt them.

Iowa phased its inheritance tax out in 20 percent steps from 2021 through 2024, and no Iowa inheritance tax applies to the estate of anyone who died on or after January 1, 2025.

How Does the New Jersey Inheritance Tax Work?

New Jersey’s transfer inheritance tax survived the 2018 repeal of the state’s estate tax. It applies to the estates of New Jersey residents, wherever their property is, and to New Jersey real estate and tangible personal property owned by nonresidents. The rate depends on which class the beneficiary falls into.

Class A, exempt. The spouse, civil union partner, or registered domestic partner; children, including adopted children and stepchildren, though not step-grandchildren; grandchildren and more remote descendants; parents and grandparents; and a “mutually acknowledged child,” someone the decedent raised as a child without formal adoption.

Class C, taxed at 11 to 16 percent. Siblings, and the spouse or surviving spouse of a child. The first 25,000 dollars each Class C beneficiary receives is exempt. The next 1,075,000 dollars is taxed at 11 percent, the next 300,000 at 13 percent, the next 300,000 at 14 percent, and anything above 1,700,000 at 16 percent.

Class D, taxed at 15 to 16 percent. Everyone not in another class: nieces and nephews, cousins, aunts and uncles, friends, unmarried partners who are not registered domestic partners, and step-grandchildren. The first 700,000 dollars is taxed at 15 percent and the balance at 16 percent. There is no exemption beyond a rule that transfers under 500 dollars are not taxed.

Class E, exempt. Qualified charities, religious and educational institutions, and the State of New Jersey and its subdivisions.

Several rules extend or limit the tax:

• Life insurance payable to a named beneficiary, or to the beneficiaries of an insurance trust, is exempt. Insurance payable to the estate is taxed as part of it.
• Gifts within three years of death. Under N.J.S.A. 54:34-1(c), a transfer for less than full consideration made within three years before death, of a material part of the estate or in the nature of a final disposition, is “deemed to have been made in contemplation of death” unless the estate proves otherwise, and is taxed as if it passed at death. Gifts made more than three years before death are never pulled back.
• Transfers taking effect at death, such as joint accounts, payable-on-death designations, and property in which the decedent kept an income interest, are taxed according to the beneficiary’s class.
• The return and the tax are due eight months after death. Interest runs at 10 percent per year on any tax unpaid after that date. An extension of time to file is available; an extension of time to pay is not.

What Is a New Jersey Inheritance Tax Waiver?

This is the part of the system that affects every New Jersey estate, including estates that owe no tax. New Jersey places a lien on a decedent’s property until the Division of Taxation consents to its transfer. A New Jersey bank account, brokerage account, stock in a New Jersey corporation, or parcel of New Jersey real estate cannot be released or retitled without a waiver, which the Division issues on Form 0-1 after reviewing a return, one waiver per asset.

For estates passing entirely to Class A beneficiaries, the Division allows self-executing waivers that skip the review. Form L-8 is an affidavit the executor or surviving joint owner gives directly to a bank or broker to release accounts. Form L-9 is the equivalent for real estate, filed with the Division to obtain a waiver for recording. When any Class C or D beneficiary is involved, a full return must be filed and the estate waits for Form 0-1.

Two provisions ease the wait. Real estate held by spouses as tenants by the entirety passes to the survivor without a waiver. And under what the Division calls the blanket waiver, a financial institution may release up to 50 percent of the date-of-death balance of a bank or brokerage account to the executor or surviving joint owner before any waiver issues, and may honor a check in any amount payable to the Division for the inheritance tax itself. Stocks, bonds, and real estate are excluded from the blanket waiver.

Which States Have an Estate Tax Instead?

Twelve states and the District of Columbia impose an estate tax in 2026: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington, plus D.C. Exemptions range from about one million dollars in Oregon to 15 million dollars in Connecticut, and most states adjust theirs annually.

For our clients, two matter:

New York has no inheritance tax. Its estate tax exemption is 7,350,000 dollars for deaths in 2026, with a “cliff” under which an estate more than about 5 percent over the exemption loses the exemption entirely and pays tax on everything. New York also adds back taxable gifts made within three years of death.

Connecticut has no inheritance tax. Its estate and gift tax exemption is 15 million dollars for 2026, matching the federal amount, and Connecticut is the only state that taxes lifetime gifts.

New Jersey has had no estate tax for deaths after December 31, 2017. A New Jersey resident whose entire estate passes to a spouse, children, and grandchildren owes no state death tax of any kind, regardless of size.

Does an Inheritance Tax Apply If You Live Somewhere Else?

Yes, if the property is in one of the five states. Inheritance taxes reach real estate and tangible personal property located in the taxing state even when the owner lived elsewhere. A Connecticut resident who leaves a shore house in New Jersey to a nephew owes New Jersey inheritance tax on the house, reported on the nonresident return, Form IT-NR. Intangible property such as bank accounts and securities is generally taxed only by the state of the decedent’s domicile. Conversely, an heir who lives in New Jersey owes no New Jersey inheritance tax on property inherited from a parent who lived and owned property only in Florida.

How Do You Plan Around an Inheritance Tax?

• Give early. New Jersey’s three-year rule means gifts completed more than three years before death escape the tax entirely. Annual exclusion gifts of up to 19,000 dollars per recipient in 2026 require no federal gift tax return.
• Use life insurance. A policy payable to a Class D beneficiary, such as a partner or a nephew, passes free of New Jersey inheritance tax, while the same amount left by will is taxed at 15 percent.
• Consider marriage or registration. An unmarried partner is Class D; a spouse or registered domestic partner is Class A. For couples with significant assets, the tax difference is substantial.
• Decide who bears the tax. A will can direct whether each beneficiary’s share bears its own inheritance tax or the residue pays it for everyone. Silence leaves the question to state law and often to the executor’s judgment, and it should be a deliberate choice.
• Coordinate across states. A New York or Connecticut resident with New Jersey property faces two systems, and the order in which assets are left to whom can change the total.

Our article on dividing personal belongings after a death explains how New Jersey’s classes apply to household items left to friends and more distant relatives.

Plan Well. Live Better.

New Jersey’s inheritance tax is the state death tax most likely to touch an ordinary family, and it is also the easiest to plan around once the classes are understood. At Milvidskiy Law Group, we help clients structure their estates so that the people they choose receive what they intended, and we prepare inheritance tax returns and waivers for the executors who follow. Learn more about our estate planning services.

This article is for general informational purposes only and does not constitute legal or tax advice. Reading it does not create an attorney-client relationship. State inheritance and estate tax rates, exemptions, and procedures change frequently; figures cited are for 2026 and were verified in September 2026 against the revenue departments of Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania and other sources. Confirm the current rules before relying on them.