Important: This article is general educational information, not tax or legal advice. Tax rules change and many depend on the state. Confirm figures with the IRS, your state tax authority, or a licensed CPA or attorney.
Quick answer: An estate tax is charged on the value of what a person leaves behind, and it is paid by the estate before heirs receive their share. An inheritance tax is charged on what each heir receives, and the heir is the one responsible for it. The federal government has an estate tax but no inheritance tax. A handful of states have one or both.
What Is an Estate Tax?
The estate tax applies to the total value of a person’s property at death: real estate, investments, retirement accounts, business interests, and life insurance the person owned. The estate pays the tax, normally before assets are distributed. Debts, expenses, and certain deductions (such as property passing to a U.S. citizen spouse or to charity) reduce the taxable amount.
At the federal level, only estates above a high exemption owe tax. For people who die in 2026, that exemption is $15 million per person ($30 million for a married couple using portability), with a top rate of 40% on the excess (Bowditch & Dewey; Taxstra). See our full guide to the 2026 federal estate tax exemption.
What Is an Inheritance Tax?
An inheritance tax is a state tax paid by the person who receives the inheritance. There is no federal inheritance tax. As of 2026, five states collect one: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa repealed its inheritance tax in 2025 (Ramsey Solutions; ustax.tools).
Rates and exemptions usually depend on the heir’s relationship to the person who died. A surviving spouse is exempt in all five states, close relatives often pay less or nothing, and distant relatives and unrelated heirs generally pay the most. The rules follow the state where the person who died lived (and sometimes where they owned real estate), not necessarily where the heir lives. See states with an inheritance tax in 2026.
Estate Tax vs. Inheritance Tax: Side-by-Side
| Feature | Estate Tax | Inheritance Tax |
|---|---|---|
| Who pays | The estate (before distribution) | The person who inherits |
| Based on | Total value of the estate | Value of each heir’s share |
| Federal level | Yes ($15 million exemption in 2026) | No |
| State level | 12 states and D.C. | 5 states |
| Spouse | Generally deductible if the spouse is a U.S. citizen | Exempt in every state that has the tax |
| Exemptions depend on | Size of the estate | Heir’s relationship and the amount received |
Can One Estate Owe Both?
Yes, in principle. An estate can owe federal estate tax and a state estate tax, and an heir can owe state inheritance tax on top. Maryland is the only state that imposes both an estate tax and an inheritance tax (ustax.tools). In practice, most estates owe neither, because the thresholds and exemptions are high or because heirs are exempt relatives.
Do Most Families Pay Either Tax?
No. A married couple can generally shelter $30 million from the federal estate tax, and a large share of heirs are exempt from state inheritance taxes. State estate taxes are the more common surprise, because some start at $1 million (Creative Planning). Check states with an estate tax in 2026.
Is an Inheritance Counted as Income?
Generally not. Property you receive as an inheritance is usually not included in your federal income. But income the property produces later, such as dividends or rent, is taxable, and special rules apply to inherited retirement accounts. Read Do You Pay Taxes on an Inheritance? and our guide to the step-up in basis.
Frequently Asked Questions
Is inheritance tax the same as estate tax?
No. Estate tax is paid by the estate on its total value. Inheritance tax is paid by each heir on what they receive.
Does the federal government have an inheritance tax?
No. Only some states do.
Which is more likely to affect me?
That depends on your state and your relationship to the person who died. Spouses are exempt from inheritance taxes, and the federal estate tax applies only to very large estates. Review your state’s rules.
Related Guides
- Federal Estate Tax Exemption 2026: $15 Million Explained
- States With an Estate Tax in 2026
- States With an Inheritance Tax in 2026
- Form 706: Who Must File and When
- Gift Tax vs. Inheritance: 2026 Annual Exclusion Rules
Keep Reading
- What Is Probate? How It Works Step by Step
- What Does an Executor Do? Duties and Pay
- Will vs. Living Trust: Which Do You Need?
- How to Avoid Probate: 7 Legal Strategies
How We Prepared This Article
We start with primary sources, such as the IRS, the Internal Revenue Code, and state revenue departments, and then compare figures with reputable secondary publications. When sources disagree, we say so. Dollar amounts, deadlines, and state rules are reviewed at least twice a year and whenever the law changes. This website is an educational publisher, not a law firm or CPA firm.
When to Get Professional Help
Talk to a licensed estate attorney or CPA if you are an executor, if the estate may exceed a state or federal threshold, if you own property in more than one state, or if a filing deadline is close.
Sources
- IRS: Instructions for Form 706
- Additional references consulted (not linked): Bowditch & Dewey, Taxstra, ustax.tools, Ramsey Solutions, and Creative Planning, 2025 to 2026 publications on estate and inheritance taxes.
Last reviewed: October 4, 2026
Next review due: April 4, 2027
Disclaimer: This content is for general information only and is not tax or legal advice. Laws vary by state and change over time. Consult a licensed CPA or attorney about your situation.