Most families do not owe federal estate tax. State taxes are different. A few states tax the estate itself, a few tax certain beneficiaries who inherit, and Maryland does both. The first step is knowing which tax you are looking at.
Estate tax is paid by the estate before distribution. Inheritance tax is paid by the person who receives property. For 2026 deaths, the federal estate tax filing threshold is $15 million, but some state taxes begin at much lower amounts.
- Estate tax states include Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, and DC.
- Inheritance tax states are Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
- Iowa's inheritance tax was phased out for deaths after January 1, 2025.
Estate Tax vs. Inheritance Tax
Estate tax is calculated on the estate as a whole. The executor usually handles the filing and payment before assets are distributed to heirs.
Inheritance tax is based on who receives the property. A surviving spouse is usually exempt. Children, parents, siblings, more distant relatives, and unrelated beneficiaries may be taxed differently depending on the state.
The federal government has an estate tax, but no federal inheritance tax. The IRS says an estate tax return is required when the gross estate plus adjusted taxable gifts is above the filing threshold for the year of death. For 2026 deaths, that threshold is $15 million.
States With Estate Tax in 2026
These states and DC generally have estate taxes in 2026. Thresholds and rates are summarized for planning only; always verify against the state's current tax agency guidance before filing or distributing assets.
| State | 2026 planning threshold | Notes |
|---|---|---|
| Connecticut | Generally tied to the federal threshold | Unified estate and gift tax system. |
| District of Columbia | Indexed local exemption | Local estate tax filing may apply below the federal threshold. |
| Hawaii | About $5.49 million | State estate tax; portability may be available. |
| Illinois | $4 million | State estate tax return may be required even when no federal return is due. |
| Maine | Indexed exemption | State threshold changes with inflation. |
| Maryland | $5 million | Maryland has both estate tax and inheritance tax. |
| Massachusetts | $2 million | Lower threshold makes planning important for property-heavy estates. |
| Minnesota | $3 million | State estate tax with its own filing rules. |
| New York | Indexed exemption | Watch the estate tax cliff for estates just above the threshold. |
| Oregon | $1 million | One of the lowest state estate tax thresholds. |
| Rhode Island | Indexed exemption | State estate tax threshold changes annually. |
| Vermont | $5 million | State estate tax may apply below the federal threshold. |
| Washington | State threshold changed by 2026 legislation | Verify the date-of-death threshold and rates with Washington DOR. |
States With Inheritance Tax in 2026
Inheritance tax depends heavily on the beneficiary's relationship to the person who died. A spouse is usually exempt, but siblings, nieces, nephews, friends, and unmarried partners may face different rules.
| State | Who may owe tax | General note |
|---|---|---|
| Kentucky | More distant relatives and unrelated beneficiaries | Close family members are commonly exempt; others may owe based on class. |
| Maryland | Some non-close beneficiaries | Maryland also has a separate estate tax. |
| Nebraska | Beneficiaries based on relationship class | County-level administration can matter. |
| New Jersey | Non-exempt beneficiary classes | Spouses, children, parents, and many lineal heirs are generally exempt. |
| Pennsylvania | Most beneficiary classes, with different rates | Transfers to spouses are exempt; lineal heirs are taxed at a lower rate than collateral heirs. |
What Executors Should Do Before Distributing
- Identify the state of residence. State estate tax usually depends on where the deceased lived, but real estate in another state can create additional questions.
- Separate estate tax from inheritance tax. Know whether the estate pays, the beneficiary pays, or both may apply.
- Check beneficiary relationships. In inheritance-tax states, the same asset can be taxed differently depending on who receives it.
- Hold back enough money. Do not distribute everything before final income taxes, estate income taxes, state death taxes, debts, and administration expenses are known.
- Get professional help for taxable estates. A CPA or estate attorney is usually worth it when state death tax may apply.
We checked federal estate tax filing rules against the IRS and cross-checked state tax status against current state-guide review notes. State exemptions, rates, and forms change frequently; verify the current state tax agency page before filing.