When Do You Have to Pay Inheritance Tax? Deadlines, Rules & Who Pays
POINTS
-
The U.S. has no federal inheritance tax.
-
Only six states currently impose an inheritance tax.
-
The beneficiary usually pays inheritance tax, not the estate.
-
Spouses are generally exempt, while other heirs may qualify for exemptions.
-
The tax depends on the state, your relationship to the deceased, and the inheritance value.
-
Late payments may result in penalties and interest.
Inheritance tax can apply when assets are transferred after a person’s death under the tax laws of a particular country or jurisdiction.
Tax liability is determined by the laws that govern the estate, and those rules are not the same across every jurisdiction.
Inheritance tax is separate from estate tax, although some jurisdictions use only one of the two.
State Estate & Inheritance Tax Rules by State
Which states tax an estate before it’s distributed, tax the beneficiary who receives it, both, or neither.
Hover or tap a state to see details
How Much Inheritance Is Tax-Free? See What You May Owe
Federal vs. State “Death” Taxes
At the federal level, only an estate tax applies.
If an estate exceeds the exemption amount, the value above the threshold may be taxed at rates of up to 40%. Federal estate tax returns (IRS Form 706) are generally due 9 months after the date of death, although a 6-month filing extension may be requested using Form 4768.
By contrast, inheritance taxes are entirely state-level and paid by heirs or beneficiaries.
Who Pays Which Tax?
- Federal estate tax: paid by the estate when the estate value exceeds the federal exclusion.
- State estate tax (where any): typically paid by the estate.
- State inheritance tax: paid by the beneficiaries/transferees of the estate.
Filing and Payment Deadlines:
Federal and state estate tax returns are generally due 9 months post-death with extensions.
But, inheritance-tax deadlines vary by state:
- Pennsylvania and Maryland follow the 9‑month rule
- New Jersey: 8 months
- Nebraska: 12 months, and
- Kentucky: 18 months.
What States Have Inheritance Tax?
As of now, there are only five U.S. states that currently impose an inheritance tax
Iowa used to have an inheritance tax, but it was fully repealed for deaths occurring on or after January 1, 2025.
| State | Inheritance Tax? | Rates (Class-Based) | Exemptions / Thresholds | Who Pays | Deadline |
|---|---|---|---|---|---|
| Kentucky | Yes (no estate tax) | Class A: 0% (spouse, children, parents, grandparents, siblings, etc.) Class B: 4%–16% Class C: 6%–16% |
Class A: Fully exempt Class B: $1,000 exemption Class C: $500 exemption |
Beneficiary / heir | Generally due within 18 months after death. Discount available for early payment. |
| Maryland | Yes (also has estate tax) | 10% flat tax on taxable transfers | Exempt: spouse, children, parents, grandparents, stepchildren, siblings, charities, etc. $50,000 estate-value rule may eliminate tax in some cases |
Beneficiary / heir (collected through probate) | Usually handled during probate; related estate tax return generally due 9 months after death |
| Nebraska | Yes (no estate tax) | Immediate family: 1% after exemption Remote relatives: 11% after exemption Others: 15% after exemption |
Immediate family: $100,000 exemption Other relatives: $40,000 exemption Others: $25,000 exemption |
Beneficiary / heir | Generally due within 1 year after death |
| New Jersey | Yes (estate tax repealed in 2018) | Class A: 0% Class C: 11%–16% Class D: 15%–16% |
Class A: Fully exempt (spouse, children, parents, grandparents, etc.) Class C: $25,000 exemption Class D: No exemption |
Beneficiary / heir | Inheritance tax return generally due 8 months after death |
| Pennsylvania | Yes (no estate tax) | Spouse: 0% Parent → minor child: 0% Children/grandchildren: 4.5% Siblings: 12% Others: 15% |
No general exemption for taxable beneficiaries | Beneficiary / heir (or estate representative) | Return generally due 9 months after death; early payment discount may apply |
All other U.S. jurisdictions do not impose an inheritance tax (though many have estate or gift taxes).
How Inheritance Taxes Change Based on Who Receives the Estate
This table shows how inheritance taxes can vary depending on who receives the assets, the size of the estate, and the state involved.
| Example | Who Receives the Inheritance? | What Happens? | Approximate Tax Result |
|---|---|---|---|
| 1. Spouse inherits | Husband or wife receives $1 million | Spouses usually get the best tax treatment. Federal estate tax does not apply, and the listed states exempt spouses. | $0 tax |
| 2. Child inherits | Child receives $2 million | Federal estate tax does not apply because the estate is below the exemption amount. State rules vary: some states exempt children, while others charge a small inheritance tax. | $0 to about $90,000 depending on state |
| 3. Friend inherits | Friend receives $1 million | Friends are not considered close family in most states. They usually receive fewer exemptions and higher tax rates. | About $100,000–$153,000 depending on state |
| 4. Married couple uses portability planning | Couple has $20 million total and plans ahead | Each spouse uses their federal exemption. The surviving spouse can use the first spouse’s unused exemption if the proper filing is completed. | Potentially $0 federal estate tax |
| 5. Large gift to siblings without planning | Siblings receive $20 million | Amount above the federal exemption may be subject to estate tax. Some states may also charge inheritance tax. | Potentially millions in taxes |
How to Reduce or Avoid Inheritance/Estate Taxes?
The best strategy depends on your estate size, state of residence, citizenship, assets, and family situation.
1. Use Exemptions Fully
Spousal transfers are exempt.
So, if you leave everything to your spouse, no federal or state taxes apply.
But you need to also think about portability: file a possibly no-tax-due estate tax return so the unused exemption carries over.
Minor children: Pennsylvania even exempts transfers from parent to child ≤21.
2. Annual and Lifetime Gifting
Another way you can save on taxes is through lifetime gifts to reduce the taxable estate.
Federal law allows $17,000 per recipient per year (indexed) tax-free gifts. Many states (like NE) exclude pre‑death gifts older than 3 years.
| Your Approximate Wealth | Do You Need to Worry About Estate Tax? | What You Can Start Doing | Difficulty |
|---|---|---|---|
| Under $1 million | Usually no federal estate tax concern | Make a will, update beneficiaries, organize accounts, consider simple trust planning |
|
| $1M – $5M | Usually still low concern, but planning helps | Give small yearly gifts, help family with education or medical costs, review beneficiaries |
|
| $5M – $10M | Future growth may create tax concerns | Give assets that may increase in value, review estate plan, consider trusts |
|
| $10M – $20M | Estate tax planning becomes important | Use lifetime gifts, create trusts, move future growth outside your estate |
|
| $20M – $50M | Significant estate planning opportunity | Transfer business/investment assets, use advanced trusts, plan for children and grandchildren |
|
| $50M+ | Requires specialized planning | Build a long-term wealth plan using trusts, charitable strategies, and professional advisors |
|
Charitable gifts are also typically exempt from inheritance tax and may reduce the size of the taxable estate, making them a common estate planning strategy.
3. Trusts
Irrevocable trusts such as Life Insurance Trusts and Dynasty Trusts can remove asset value from the taxable estate if done properly.
A properly funded Irrevocable Life Insurance Trust keeps the policy proceeds out of the estate.
Qualified Terminable Interest Property trusts and other bypass trusts allow use of both spouses’ estate exemptions.
If you retain too much control or beneficial interest in the transferred assets, the property may still be included in your taxable estate under IRC §§2036–2038.
Because these rules are highly technical, professional legal and tax guidance is recommended when establishing an irrevocable trust.
4. Charitable Giving
You can also leave part of the estate to charity, which eliminates that portion from taxes.
Federal estate tax allows an unlimited charitable deduction; states likewise exempt charities.
Because charitable bequests are generally exempt from federal estate tax and many state inheritance taxes, only the remaining $500,000 would typically be considered when calculating any applicable taxes.
5. Portability and Filing Returns
To preserve a deceased spouse’s exemption, you can file the federal Form 706 even if no tax is due.
Many taxpayers neglect this and lose the portability benefit. Once claimed, the survivor gets the unused exemption amount.
6. Deductions and Expenses
Estates can deduct
- Funeral costs
- Admin expenses
- Medical expenses, and
- Debts before tax.
Many states similarly allow deducting estate obligations.
For instance, Nebraska explicitly permits deducting funeral expenses, estate administration costs, last‑illness expenses, debts, and federal estate tax paid.
7. Timing and Investments
In some cases, asset valuation timing is important.
For example, funding trust vehicles or life insurance early can grow outside the estate.
State Inheritance Tax FAQs
No. The federal government taxes estates, not inheritances. Only certain states impose an inheritance tax on people who receive assets from an estate.
The beneficiary or heir who receives the inheritance is generally responsible for paying the tax. The estate representative may handle filing and payment.
Usually no. Spouses are exempt in all inheritance-tax states, and children often receive full or partial exemptions depending on the state.
Late filings may result in penalties and interest. Deadlines and charges vary by state, so filing on time is important.
Common strategies include using available exemptions, charitable gifts, trusts, and estate planning techniques. Rules vary by state and individual circumstances.
No. Gift tax applies to certain transfers made during a person’s lifetime, while inheritance tax applies to assets received after someone’s death.
For federal estate rules, review IRS guidance. For state inheritance taxes, check your state’s tax agency or official resources.
References:
